Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

ARGYLL COUNTY COUNCIL (ARINAGOUR AND CRAIGNURE PIERS, ETC.) ORDER CONFIRMATION BILL

NATIONAL TRUST FOR SCOTLAND ORDER ORDER CONFIRMATION BILL

Read the Third time and passed.

FORTH ROAD BRIDGE ORDER CONFIRMATION (No. 2) BILL

Consideration deferred till Tomorrow.

FORTH ROAD BRIDGE ORDER CONFIRMATION (No. 2) [MONEY]

Queen's Recommendation signified.

Considered in Committee under Standing Order No. 84 (Money Committees).

Resolved,
That, for the purposes of any Act of the present Session to confirm an Order to authorise the Forth Road Bridge Joint Board to acquire additional lands and to construct further works, to confer further powers on the said Board, and for other purposes, it is expedient to authorise the payment out of moneys provided by Parliament of any increase attributable to the said Act in any advance by way of loan made by the Secretary of State under the Order confirmed by the Forth Road Bridge Order Confirmation Act, 1958.—[Mr. Maclay.]

Resolution to be reported.

Report to be received Tomorrow.

Oral Answers to Questions — SCOTLAND

Erskine Bridge

Mr. Steele: asked the Secretary of State for Scotland if he has yet received the Traffic Census Report on Erskine Bridge; and when he expects to make a statement.

The Joint Under-Secretary of State for Scotland (Mr. R. Brooman-White): The report prepared jointly by the Dunbarton and Renfrew County Councils is being studied and my right hon. Friend hopes that he will shortly be able to discuss its contents with them and with the Clyde Navigation Trust.

Mr. Steele: Is the hon. Gentleman aware that last summer vehicles were waiting one and a half to two hours before they could cross this ferry and that at the same time the census brought out the fact that almost 3,000 vehicles a day were taking alternative routes? This means further congestion in Glasgow. Will this matter be treated with some urgency?

Mr. Brooman-White: Yes, Sir, we will get on with it as quickly as possible, but I think it right first to discuss it with the local authorities who prepared the report.

School, Helensburgh

Mr. Steele: asked the Secretary of State for Scotland when he expects work will commence on the new secondary school at Helensburgh.

Mr. Brooman-White: Dunbarton Education Authority expects to start building work in September, 1963.

Mr. Steele: Nineteen sixty-three? Is the hon. Gentleman aware that the school population at Helensburgh is growing very rapidly and that the position of both staff and pupils at the moment is quite intolerable? Does not the special circumstance warrant some special urgency in the matter?

Mr. Brooman-White: I am sure the hon. Gentleman will appreciate that the priorities are a matter for the local


authority. This is a big project, which requires a lot of preparatory work.

Mr. Steele: But, surely, two years for planning a new school is something extraordinary.

Mr. Brooman-White: There has been difficulty over the site, as the hon. Gentleman knows.

Brown Trout (Research)

Mr. Manuel: asked the Secretary of State for Scotland why no full-time research on brown trout and brown trout fisheries is being carried out; and whether he will now ensure that this research work is undertaken by the Freshwater Fisheries Laboratory at Pitlochry, Perthshire.

The Joint Under-Secretary of State for Scotland (Mr. Gilmour Leburn): The present programme of the Freshwater Fisheries Laboratory at Pitlochry includes a number of projects on brown trout research.

Mr. Manuel: Is the Minister aware that my information is quite different? Would he not agree that, in view of the very greatly increased demand for brown trout angling arising from the work of the Scottish Tourist Board, it would be very wrong that brown trout research should now be stopped? Will the hon. Gentleman take immediate steps to investigate why the research has been switched entirely to salmon and to restore and extend brown trout research at the Pitlochry Laboratory?

Mr. Leburn: For the ten years to 1958 the Laboratory devoted most of its attention to brown trout. While it is now doing more work on salmon, a considerable amount of work is still being done on brown trout.

Mr. T. Fraser: Is the Joint Under-Secretary aware that the many angling clubs throughout Scotland—and many more people are engaged in angling with these clubs than in salmon fishing—are concerned that nobody is occupied full-time with brown trout research and that the energies of the Laboratory seem mainly to be devoted to salmon research?

Mr. Leburn: It is true that the Laboratory is devoted mainly to that

purpose, but it is always prepared to answer queries from angling clubs or give any help that it can to them.

Sir J. Duncan: Will my hon. Friend give an assurance that, in view of the increased importance of trout angling in the Highlands of Scotland, this research work will not be stopped?

Mr. Leburn: I agree that it is very important. In view of what has been said by hon. Members on both sides, I will go into this matter.

Forth Road Bridge

Mr. Woodburn: asked the Secretary of State for Scotland by what date he now expects the Forth Road Bridge and its approach roads to be completed.

Mr. Brooman-White: I have nothing to add to the reply which I gave to the right hon. Member on 15th November last.

Mr. Woodburn: Is the hon. Gentleman aware that the congestion is already starting at the bridge? Is there any possibility that the dates may be anticipated by better progress in the work?

Mr. Brooman-White: I have seen speculation in the Press, but it would be rash to prophesy.

National Gallery Pictures (Photographic Reproductions)

Mr. F. Noel-Baker: asked the Secretary of State for Scotland under what conditions the Esso Petroleum Company, or their advertising agents, are permitted to reproduce pictures in the National Galleries of Scotland for advertising purposes.

Mr. Brooman-White: A fee is charged for the use of photographic reproductions of which the copyright subsists in the trustees, and such reproductions must bear an acknowledgment to the National Galleries of Scotland. These conditions were complied with by the advertising agents for the Esso Petroleum Company.

Mr. Noel-Baker: Will the Joint Under-Secretary give us some details of the size of the fee? Would he agree that so long as the oil companies are permitted to spend vast sums on advertising at the expense of consumers, it is


not a bad thing that they should do it by reproducing works of art? At least, the owners—in this case, Scotland—should jolly well get their money's worth. Is the hon. Gentleman satisfied that they are?

Mr. Brooman-White: The fixing of the fees is a matter for the trustees of the Gallery.

Mr. Noel-Baker: What are the fees?

Rheumatological Unit

Miss Herbison: asked the Secretary of State for Scotland when it is proposed that work will commence on the rheumatological unit for the west of Scotland.

The Joint Under-Secretary of State for Scotland (Mr. T. G. D. Galbraith): The Western Regional Hospital Board has now submitted plans for this unit to my right hon. Friend's Department. The Board expects to start work in the spring of next year.

Miss Herbison: Is the Under-Secretary aware that this has been on the board since 1957 and that during all these years more than half the population of Scotland has been denied proper medical care in this disease? Could not the hon. Gentleman take steps to get it started before the spring of next year?

Mr. Galbraith: I have a good deal of sympathy with the hon. Lady. But I could not hold out much hope, because this is work in which a good deal of architectural alteration must be done and the plans are considerably more comprehensive than the original ones. For that reason, I am afraid that the work will take the time I have said.

Road Bridge, Shotts

Miss Herbison: asked the Secretary of State for Scotland when work will commence on the widening of the road bridge over the station at Shotts.

Mr. Brooman-White: Owing to pressure on the funds for classified roads schemes my right hon. Friend will not be able to authorise grant on all the schemes which Lanarkshire County Council would like to carry out in 1961–62. Within the total which he will notify to them shortly he would, however,

be prepared to accept this scheme for grant if they accord it priority over others.

Miss Herbison: Is the Minister aware that this scheme has been on the board since the early 'thirties, that this is a dangerous part of the road and that, apart from danger to pedestrians, it causes great harm when we are trying to attract industry to the area?

Mr. Brooman-White: We are aware of those facts and will give the scheme priority if it is put forward.

Fishing Vessel "Red Crusader" (Incident)

Mr. Hector Hughes: asked the Secretary of State for Scotland if he will now give details of the incident when last week a Danish frigate fired on the unarmed fishing vessel "Red Crusader", which he discussed with representatives of the Admiralty, the Lord Privy Seal and representatives of the Danish Government.

Mr. Leburn: There is nothing material I can add to the details of the incident given by my right hon. Friend the Lord Privy Seal on 31st May; and, as he has since announced, Her Majesty's Government are in touch with the Danish Government about their proposal that there should be an impartial inquiry into the whole incident.

Mr. Hughes: Does the Minister not realise that that Answer is entirely too vague about this very important matter to the fishing industry in Scotland? As the Secretary of State has had, or should have had, discussions with the Admiralty, the Lord Privy Seal and the Danish Government, does not the hon. Gentleman realise that it is undemocratic and wrong to keep secret the facts of this matter? Will he repair the damage that he has done in this way?

Mr. Leburn: There have been a great many discussions, but, clearly, there are many matters in dispute. While the question of an inquiry is pending, I should prefer not to comment on any of these matters.

Fishing Vessel (Seizure of Nets)

Mr. Hector Hughes: asked the Secretary of State for Scotland if he has yet decided to provide compensation to the


owner, skipper and crew of the fishing vessel whose nets were seized by his fishery cruiser "Minna" on 9th October, 1960, and who were prosecuted by his Department, in view of the fact that the owner incurred loss by the seizure of his nets and the disbandment of his crew, was prevented from fishing for many weeks and was obliged to pay law costs for his defence before the prosecution was dropped in May, 1961, after many adjournments, full particulars of which case have been furnished to him; and if he will make a statement.

Mr. Leburn: A claim has been intimated to my right hon. Friend's Department and is at present being investigated.

Mr. Hughes: That, again, is far too vague. Does the Minister not realise that this is a glaring miscarriage of justice and that the North Sea should not be made a battleground between his ship and the fishing vessels there? It is wrong that a battleground should be made, first, in the North Sea and then in the criminal courts and then the prosecution discontinued without giving compensation to the owners of the fishing vessels which are damaged.

Mr. Leburn: I could not accept all the comments of the hon. and learned Member. If, however, a claim is substantiated, damages will be paid.

New Towns (Community Facilities)

Mrs. Hart: asked the Secretary of State for Scotland what steps he is taking to ensure that adequate financial assistance is given to the promotion of facilities for youth and community organisations in new towns.

Mr. Brooman-White: The development corporations of the three new towns are authorised to contribute up to 50 per cent. of the capital cost of community facilities in the new towns, including those specially intended for young people. Also, in a recent circular on youth service my right hon. Friend announced a new scheme of capital grants to assist local voluntary youth organisations whether in new towns or elsewhere.

Mrs. Hart: Is the Joint Under-Secretary of State aware that one of the difficulties, in a new town, such as East

Kilbride, where many organisations—for example, the Churches—are doing a splendid job, is the difficulty of starting up an effective youth organisation and that there is trouble in qualifying for the capital grant under the Secretary of State's scheme? Could the Minister consider giving capital grants to new projects where they seem worth while and likely to succeed?

Mr. Brooman-White: I understand that in East Kilbride new efforts which have been made to set up suitable organisations are progressing favourably.

Local Authorities (Finance)

Mr. W. Hamilton: asked the Secretary of State for Scotland if he is aware of the increased and increasing financial difficulties of local authorities; and whether he will therefore initiate an official inquiry into the whole problem of local taxation, with particular reference to the feasibility of a local income tax.

Mr. Galbraith: No, Sir, my right hon. Friend does not accept that difficulties are imposed by the present system which would necessitate such an inquiry. The whole subject of local government finance was examined a few years ago, including the feasibility of a local income tax.

Mr. Hamilton: Is the hon. Gentleman as much in touch with local authorities as his Answer would seem to assume? Is he not aware that many of us, certainly on this side of the House, are getting letters from local authorities drawing attention to their financial difficulties? Why on earth cannot the Department set up some kind of investigation into this problem? The solution suggested in the Question was recommended some years ago by the Institute of Public Administration, a non-party organisation which took an objective view of the matter. Will not the hon. Gentleman consider looking into it again?

Mr. Galbraith: As a result of revaluation, where some values go up more than average, there is bound to be a reduction in the amount of equalisation grant which is given to the local authority. My right hon. Friend proposes, however, to review these grant arrangements at a later stage when he has full information of the effect of revaluation.

Mr. MacArthur: Would my hon. Friend not agree that the financial problems which may face some local authorities would be greatly eased if those local authorities were to introduce a sliding-scale system of rents?

Mr. Galbraith: I dare say that that might make some difference.

Mr. Manuel: In view of his reply to my hon. Friend the Member for Fife, West (Mr. W. Hamilton), will the Joint Under-Secretary tell the House just how many representations he has had from Scottish local authorities about their increased financial difficulties? I had a letter yesterday from a constituent who had taken up this very point.

Mr. Galbraith: I could not do that without notice, but I would be willing to look into the matter and write to the hon. Member.

Mr. Hamilton: Will not the hon. Gentleman take steps to relieve the local authorities by introducing rerating of agriculture in view of the fact that its subsidy total is higher than its wages bill?

Mr. Galbraith: That is another point.

Forth and Clyde Canal

Mr. Hannan: asked the Secretary of State for Scotland what redevelopment plans have been submitted to him by local authorities or other interested bodies in respect of the Forth and Clyde canal.

Mr. Brooman-White: None, Sir. I should make it clear that the proposed legislation would provide not for the abandonment of the Canal by the British Transport Commission but for the end of its obligation to keep it open for navigation.

Mr. Hannan: I do not dissent from the decision to close the canal to navigation, but will the hon. Gentleman bear in mind that the second part of his Answer, namely, that the canal should not merely be abandoned and become a derelict waterway and a menace to children, is most important? What plans does his Department have for the development of this canal, either for roads or as a boating amenity? What financial assistance will it give to local authorities if they wish to redevelop it?

Mr. Brooman-White: None of the responsibilities of the B.T.C. for the maintenance of the canal other than for navigation has been reduced. The future varied uses of the canal is a matter, in the first instance, for the local authorities to take up with the Commission. I understand that certain discussions are at present in progress.

Mr. Willis: Before this decision was made, did the hon. Gentleman have any conversations with the fishermen's associations which are concerned with the use of this canal? If so, were they agreeable to the closing of the canal?

Mr. Brooman-White: They gave evidence to the Bowes Committee about this matter and it was taken into consideration. It was felt that the advantages outweighed the disadvantages.

Mr. Small: asked the Secretary of State for Scotland what representations he has received in connection with the decision to close the Forth and Clyde canal.

Mr. Brooman-White: My right hon. Friend has received two representations from private individuals in Oxford and Argyll.

Mr. Small: Is it the intention to spend some annual amount on the maintenance of the canal so that its disuse may not constitute a public menace in the future?

Mr. Brooman-White: If the hon. Member will look, I think he will see that I dealt with that in reply to a previous Question.

Glasgow Sheriff Court Cases (Arrears)

Mr. Hannan: asked the Secretary of State for Scotland if he is aware of the increasing arrears of cases awaiting trial in the Glasgow sheriff courts and the consequent inconvenience caused to witnesses, police and law agents; and what proposals he has to effect improvements.

Mr. Brooman-White: My right hon. Friend is aware of these difficulties and he hopes to arrange very shortly for the appointment of an additional sheriff-substitute for the Glasgow Court.

Mr. Hannan: Will the Joint Under-Secretary of State convey to his right hon. Friend the great dissatisfaction that there is about the administration of the courts in Glasgow, the frustration and misspent energy in time and money? Will the hon. Gentleman not merely consider the appointment of other procurators-fiscal, but have a look at the whole machinery so that lawyers can make proper appointments in order to deal with their business?

Mr. Brooman-White: Some additional accommodation has recently been made available, but we are well aware of the delays.

Teachers

Mr. Gourlay: asked the Secretary of State for Scotland if he will state the cost to the latest available date of paying the £100 gratuity to retired teachers who have returned to the profession.

Mr. Brooman-White: To 15th June, 1961, expenditure on the special allowances for retired teachers over age 65 who have returned to teaching amounts to £38,700.

Mr. Gourlay: Does not the hon. Gentleman realise that these figures spotlight the lamentable failure of this paltry payment to induce more teachers back into the profession? Since the Government are not prepared to pay full pension and full pay, and in the light of the appalling shortage of teachers in Scotland, would he not consider making a realistic approach to the problem by increasing this payment to something in the region of £400?

Mr. Brooman-White: This is paid in addition to salary, and we feel that it has proved a useful inducement up to the present time.

Mr. Rankin: Can the Joint Under-Secretary of State tell us how many of the teachers who returned to the profession and took their gratuity still remain in teaching?

Mr. Brooman-White: Not without notice. At present, 389 are drawing the allowance.

Hospitals (Psychiatric Units)

Mr. T. Fraser: asked the Secretary of State for Scotland if it is his policy to provide accommodation in psychiatric units attached to general hospitals for patients suffering from mental or nervous illness; and if he will ensure that all consultant psychiatrists appointed to general hospitals have beds available to them for the treatment of in-patients either in the general hospital or at some convenient mental hospital.

Mr. Galbraith: My right hon. Friend's policy is to make the most effective use both of the specialised hospitals and psychiatric units in general hospitals. While in principle it is desirable that consultants should have beds to which they can admit patients for treatment under their care, the duties to be carried out by any particular consultant are for the regional hospital board concerned to determine.

Mr. Fraser: The hon. Gentleman's reply seems to suggest that there is a difference between the policy in Scotland and that in England. Is it not a fact that the Minister of Health has made it clear that it is his policy to have psychiatric units attached to all general hospitals in the next few years? Is that the policy in Scotland? Is it not highly desirable that psychiatric units should be attached to general hospitals, and especially to large general hospitals? When does he expect this to happen?
In addition, will the hon. Gentleman call to the attention of hospital boards the desirability of making beds for inpatients available to consultant psychiatrists in their employment?

Mr. Galbraith: Of course, where new general teaching hospitals are provided, this sort of accommodation will also be provided. However, in general, we in Scotland are in a rather different position from that of England in that the majority of the Scottish mental hospitals are of reasonable size and are conveniently placed for the population which they serve. I hope that that satisfies the point raised in the first part of the hon. Gentleman's supplementary question.
In answer to the second part of his supplementary question about having beds available for consultants, the only


case of difficulty which has arisen was in the Western Regional Hospital Board, and the Secretary of State's views about it have been made known to the Board.

Mr. Fraser: Is not the hon. Gentleman aware that what he has just said about the system in Scotland is in direct conflict with what he said when last Session he was piloting through the Mental Health (Scotland) Bill, which is now an Act of Parliament? We understood that under that Measure it was the policy of the Government to replace many of the existing mental hospitals by providing the necessary psychiatric units in our general hospitals?

Mr. Galbraith: Where they are needed they will be provided. I was trying to point out that the position in Scotland is rather different from that in England, because many of the Scottish mental hospitals are well placed for the population which they seek to serve

Gas Appliances (Safety)

Sir J. Duncan: asked the Secretary of State for Scotland if he will consult with the Scottish Gas Board regarding the improvement of gas appliances and the production of new safety measures to reduce the numbers of deaths from gassing, which reached a total of 196 last year.

Mr. Galbraith: In association with my right hon. Friend the Minister of Power, my right hon. Friend is already in close touch with the Gas Council in an endeavour to improve the safety of gas appliances.

Sir J. Duncan: Is my hon. Friend aware that many deaths from gassing are accidental and mainly concern old people? Will he try to induce the Scottish Gas Board to fit safety gas taps in all places where there are old people who are frail and who, perhaps, go to sleep while the gas is still on and gas themselves accidentally? This is a very important matter. Will my hon. Friend "have a go" at it?

Mr. Galbraith: I understand that the Gas Board inspects appliances in the homes of elderly people. I shall certainly ask my right hon. Friend to draw its attention to the matter.

Mr. Manuel: is the Joint Under-Secretary of State aware that very much more needs to be done in this matter? As the hon. Member for South Angus (Sir J. Duncan) said, old people have succumbed to gas poisoning, but is the hon. Gentleman aware that far too many gas appliances are too accessible to children and can be turned on too easily? Children have died in the home from this when adults have not been present.

Mr. Galbraith: I am aware of the danger, but I think it is fair to say that in the last year there was a reduction of 15 in the number of accidental deaths, which seems to show that what the Gas Council is doing is having some effect.

Social Workers

Mrs. Hart: asked the Secretary of State for Scotland how many staff have been appointed to the new training course for social workers at the Scottish College of Commerce, and at what salary scales; how these scales compare with those of staff recruited for the similar new courses in England; what liaison there will be with the appropriate academic staff of Glasgow University; whether it is intended at a future date that the course should embrace persons other than students in child care work and what consultations concerning the course have taken place with the professional associations of social workers.

Mr. Brooman-White: The course will be conducted by the existing staff, with the addition of a social case work tutor appointed on a scale of £800 to £1,270 per annum. The appointments to be made in England have been advertised at salary scales of £1,370 to £1,550 for a lecturer and £700 to £1,150 for an assistant. The course is one of training for general social work, and only some of the students are expected to enter child care work. It was planned by a study group which my right hon. Friend appointed to consider the Younghusband Report on Social Workers, and which included representatives of the professional associations concerned. Advice was also obtained from Glasgow University School of Social Study and Training, representatives of which are being invited to serve on an advisory committee for the course that the Governors are appointing.

Mrs. Hart: Would the Joint Under-Secretary of State agree that it is clearly far from satisfactory that in England the courses will be administered by staff which are much more highly paid than the social case workers being employed specifically for this purpose in Glasgow? Should not the whole matter be looked at again? Would he also agree that it is unlikely that the existing staff at the Scottish College of Commerce would have the necessary background for this kind of training? In addition, would he have direct consultations with the professional associations representing social workers in Scotland and ask their views on these matters and on the methods of selection of students for the course?

Mr. Brooman-White: I think that the governors of the college have been advised by a highly expert selection committee—I can give the hon. Lady the names of the members of it afterwards if she wishes them—and they also have expert advice from an advisory committee. I think that the course is an experimental one and adjustments can be made in the light of experience as we go along.

Miss Herbison: There seems to have been a great deal of expert advice here, but is the hon. Gentleman aware that those in Scotland who are interested in this matter, and who were very interested in the Younghusband Report, cannot see how the present staff of this college has either the background, the training or the knowledge to train these men and women who are to do such an important social job in the community? Will not he and his right hon. Friend look at this matter again?

Mr. Brooman-White: The selection committee was satisfied, and that is a most authoritative body.

Petrol Filling Station, Auchenreoch (Inquiry)

Mr. Brewis: asked the Secretary of State for Scotland on what grounds he rejected the findings of the local public inquiry that Mr. Adam Barbour should be allowed planning permission to establish a petrol filling station at his cafe at Auchenreoch, Castle Douglas.

Mr. Galbraith: Because my right hon. Friend considered that more weight

ought to have been given to the dangers arising from increased traffic movements on the access to a fast stretch of trunk road.

Mr. Brewis: If there is so much traffic on the road, does my hon. Friend think it a good idea not to have a petrol station for sixteen miles on one side of the road between the outskirts of Castle Douglas and Dumfries, which means that all vehicles travelling on the road will have to cross the oncoming traffic to get petrol? Is he also aware that, amongst other distinguished witnesses, the accident inspector gave evidence for Mr. Barbour, and should not my hon. Friend give more weight to the Commissioner who heard the evidence and saw the ground and not substitute his own decisions?

Mr. Galbraith: I have naturally a great deal of sympathy for the hon. Gentleman and his constituent, but the fact remains that one must have regard to the desirability of avoiding anything that is likely to lead to an increase in the risk of accidents.

Moray Firth and Firth of Clyde

Mr. Hoy: asked the Secretary of State for Scotland in view of the numbers of foreign trawlers fishing in the Moray Firth and Firth of Clyde, which are at present denied to United Kingdom trawlers, what action he proposes taking in the matter in order to assist United Kingdom fishermen.

Mr. John MacLeod: asked the Secretary of State for Scotland whether he will now consider taking steps to close the Moray Firth and the Minch to foreign trawlers.

Mr. Leburn: I have nothing to add to the reply which my right hon. Friend gave on 18th May to the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes).

Mr. Hoy: This is extremely disappointing. Is the Under-Secretary not aware of what is happening in regard to the fishing grounds throughout the world? Does he not appreciate that these foreign trawlers fish in these grounds that the Government deny to British fishermen? In view of all that


is happening, has not the hon. Gentleman anything more to say? Is not the Government even considering what their policy is to be in regard to these grounds? Does he appreciate that if he does not do something soon, the fishermen will do it for him?

Mr. Leburn: Of course, I realise the difficulties here, but I can only repeat what my right hon. Friend said: that the Government are keeping fishery limits under review in the light of all relevant factors.

Mr. MacLeod: It is quite ridiculous that foreign vessels should be allowed to fish these grounds and that our own fishermen should be denied them. Cannot my hon. Friend treat this matter with far more urgency?

Mr. Leburn: I am afraid that I cannot add anything to what I have said.

Mr. T. Fraser: Is not the Under-Secretary aware that a week ago I got from his hon. Friend a Parliamentary Answer which showed that on 147 occasions last year foreign trawlers, French and Belgian, were observed fishing in these prohibited areas? What is the point of making the observation unless action is to be taken? Have the Government even made representations to the French and Belgian Governments about poaching in these areas?

Mr. Leburn: These trawlers cannot land their catches in this country for two months after.

Mr. Stodart: Is it not the fact that the judgment of the Scottish Court of Session in 1905 made it illegal for foreign trawlers to fish within the Moray Firth, and should not a decision of the 12 judges of the Court of Session be upheld?

Mr. Leburn: While that is perfectly true, Her Majesty's Government have not the power to arrest foreign vessels on the high seas.

Mr. Hoy: asked the Secretary of State for Scotland what steps he is taking to protect the fish stocks in the Moray Firth and Firth of Clyde.

Mr. Leburn: The measures taken by Her Majesty's Government, in concert with the other signatories of the Over-fishing Convention of 1946 to prevent

overfishing, apply generally to the areas referred to in the Question, and consist of regulations governing the mesh of fishing nets and the minimum sizes of white fish that may be landed. Her Majesty's Government take every opportunity of seeking the agreement of other countries to the introduction of more effective conservation measures, and took a lead in the negotiations for the North-East Atlantic Fisheries Convention of 1959. This provides machinery for more comprehensive measures, but has not yet entered into force.

Mr. Hoy: Arising out of that Answer, did not the hon. Gentleman state in reply to Question No. 20 that these fish could not be landed in this country? As a consequence of that, neither he nor the Government can check what fish are being landed in the countries to which they are taken, and our own fishermen assert that this trawling is destroying the fishing grounds and fishing beds in these areas. What we want from the Government is action to protect these grounds from the catching of small and immature fish, which will eventually destroy the fishing grounds altogether.

Mr. Leburn: I have already said that this is a difficult matter, but the number of foreign trawlers fishing in these areas is not large, and they usually come in only at certain seasons—

Mr. Hoy: I know.

Mr. Leburn: There has undoubtedly been a decline in haddock stocks and whiting stocks recently, but I am advised that this is mainly due to natural causes.

Mr. Hector Hughes: As the Minister has just said, this is a difficult matter, but is it not obvious from his Answer to Questions Nos. 20 and 22 that it is far too difficult for the Scottish Office, which is unable to solve the relevant problems? Will he ask his right hon. Friend the Secretary of State to ask the Prime Minister to appoint a Minister of Cabinet rank devoted entirely to the distribution—

Mr. Speaker: Order. This string of requests from Minister to Minister is out of order.

Mr. Hoy: On a point of order, Mr. Speaker. In view of the unsatisfactory reply given to this Question, and in view


of the importance of this industry to Scotland, I intend to raise the matter on the Adjournment.

Wheat

Mr. Stodart: asked the Secretary of State for Scotland how much wheat of the 1960 crop remains to be moved off farms in Scotland; and how this compares with the situation in the middle of June last year.

Mr. Leburn: Certificates of sale up to 10th June account for 110,000 tons, which is some 26,000 tons less than the estimated total saleable production. The comparable figure at the same time last year was 21,000 tons. Certificates of sale, however, may be submitted up to four weeks after sale and delivery, and these figures will overstate the present position of farm stocks.

Mr. Stodart: Is my hon. Friend aware that the large imports of grain, which are a feature of this summer and were not a feature of last summer, are making it well-nigh impossible to move wheat off farms in Scotland at the moment? Is he also aware of the anxieties farmers feel about the low prices being received, which will add to the deficiency payments and be a burden on the taxpayer in the future?

Mr. Leburn: I am well aware of these facts, but I do not think that they come into consideration in this Question.

Mr. Emrys Hughes: Is the Under-Secretary aware that these farmers are greatly concerned about what is likely to happen to them if we join the Common Market—[An HON. MEMBER: "Oh."] Do I understand 
that groan from an hon. Member opposite as agreeing to that point of 
view?

Mr. Speaker: It is possible that the hon. Member may have a lawful opportunity to discuss that matter.

Mr. Stodart: asked the Secretary of State for Scotland what estimate he has made of the cost of the deficiency payments on the 1961 wheat crop, assuming a similar yield per acre to that estimated in 1960, if the present price of £15 per ton persists.

Mr. Leburn: If the average United Kingdom market price per ton for the 1961 wheat crop were £15 throughout

the 1961–62 cereal year the cost of wheat deficiency payments in Scotland would be some £1,650,000.

Mr. Stodart: Can my hon. Friend confirm that that increase, if it took place, would be a very substantial one compared with that of last year? Would it be 100 per cent. or 50 per cent., or 75 per cent.? If I was out of order in asking my hon. Friend on my last Question about the anxiety of farmers, would he take it at this stage that there is considerable anxiety over what might be a tremendous burden on the Exchequer, which is reflected in the concern on the face of my right hon. Friend the Chancellor?

Mr. Leburn: I certainly understand the anxiety. As to the figure, the estimate for the current year is £1,025,000.

Mr. Emrys Hughes: In view of the unsatisfactory nature of the replies affecting farmers, I wish to give notice that I shall raise this matter at the earliest opportunity.

Mr. Speaker: Would the hon. Member be a little more precise so that we may know how the rule may work? To which Question and Answer does the hon. Member relate his notice?

Mr. Hughes: To the last.

Oat Subsidy

Sir J. Duncan: asked the Secretary of State for Scotland what revised estimate he has made of the cost of the oat subsidy in Scotland in 1961–62 if the present price of 13s. a cwt. remains.

Mr. Leburn: If the price realised in the United Kingdom for the 1961 oat crop fell to an average of 13s. per cwt., the total subsidy in Scotland would be £8·5 million.

Sir J. Duncan: Is not that figure rather large? Taking all the cereals together, it would seam that from a present figure of about £60 million they will go to over £100 million in total, which will add an enormous amount to the taxpayers' bill. Will my hon. Friend take up with the Government at the highest level the whole question of anti-clumping and protective measures to see that a reasonable price is obtained for cereals in Scotland, particularly oats, so as to avoid this burden on the taxpayer?

Mr. Leburn: The figure is certainly alarming, but so, too, is the figure quoted in my hon. Friend's Question. I hope that it will prove to be only a hypothetical calculation.

Hospital Admissions, Paisley

Mr. J. Robertson: asked the Secretary of State for Scotland what is the shortage of beds in maternity hospitals and general hospitals, respectively, in Paisley.

Mr. Galbraith: The Western Regional Hospital Board is at present undertaking a survey of the need for additional beds in general hospitals in the eastern part of Renfrewshire, including Paisley. I would prefer to await the outcome of this survey before venturing an estimate. The number of maternity beds required in the same area, on the scale recommended by the Maternity Services Review Committee, is about fifty.

Mr. Robertson: As the hon. Gentleman is aware, there is a long-standing grievance in Paisley and district about the shortage of hospital beds, and in view of the fact that he has been aware of this shortage for many years, what steps does he propose to take to meet the shortage?

Mr. Galbraith: I think the best thing to do is to wait till the regional hospital boards have finished their survey and then see what the position is.

Mr. J. Robertson: asked the Secretary of State for Scotland how many patients are awaiting admission to hospitals in Paisley; and what is the average period of waiting.

Mr. Galbraith: The total number—including non-urgent cases and those who have been waiting for only a few days—is about 850, against an annual turnover of about 7,500. Average waiting times are not readily available but I am writing to the hon. Member with details of waiting times in different specialities.

Mr. Robertson: Would the hon. Gentleman agree that this is an indication that there is a need for new hospital accommodation in Paisley and district? What proposals has he for building a new hospital in this district?

Mr. Galbraith: I am advised that the general waiting period in Paisley and district is not unduly long compared with that in other areas.

Barley

Mr. MacArthur: asked the Secretary of State for Scotland if he will state his revised estimate of the cost of supporting the barley crop in Scotland for 1961–62, in view of the present depressed state of the market.

Mr. Leburn: The cost of deficiency payment for the 1961 barley crop depends upon the average U.K. market price during the year from 1st July next. It is too early to make any useful revision of the estimated cost of supporting this crop in Scotland.

Mr. MacArthur: Is my hon. Friend aware of the depressing effect on the barley market of barley imports, and is he aware further that barley imports during the first four months of this year were running at twice the rate of the comparable period last year and in recent weeks have risen even further?

Mr. Leburn: I understand that the National Farmers' Union yesterday submitted an application to my right hon. Friend the President of the Board of Trade under the Customs Duties (Dumping and Subsidies) Act, to which my right hon. Friend will be giving urgent consideration.

Mr. Emrys Hughes: In view of the depression which exists among farmers who grow barley, would the Under-Secretary of State give us an indication of his long-term plans and tell us how he proposes to protect the barley growers from foreign competition?

Mr. Leburn: Not in Question and Answer here.

Mr. Hoy: Has the hon. Gentleman any intention of having a sliding scale for farming subsidies so that the better-off farmers will not get them?

Mr. Leburn: I think that the hon. Gentleman had better put that Question down.

Legal Aid

Mr. Willis: asked the Secretary of State for Scotland when he expects to complete his review of the provisions for legal aid in criminal proceedings.

Mr. Brooman-White: I am not in a position to add to the replies given by


my right hon. Friend to the Questions asked on 13th June by the hon. Member for Dumbartonshire, West (Mr. Steele).

Mr. Willis: Is the hon. Gentleman not aware that they were most unsatisfactory Answers? Surely he can give us some indication when he expects to complete his review? Is he not aware that the present system is in great danger of breaking down because of the lack of money? Is it not intolerable that Scotland should be placed in this position when England has been placed in a much better one long ago? Will not he do something about it?

Mr. Brooman-White: Yes, but it is a very difficult question. The hon. Member will realise that the Guthrie Committee was not unanimous over the difficult question of financial eligibility for legal aid.

Moray House Demonstration School

Mr. Willis: asked the Secretary of State for Scotland whether he will make a further statement concerning the future of Moray House Demonstration School.

Mr. Brooman-White: My right hon. Friend has informed the Governors of Moray House College of Education that he approves the closure of the Secondary Department of the Demonstration School on condiiton that it is closed by stages, so that pupils already in the Department may complete their schooling there. He has also expressed his hope that when the present serious difficulties of accommodation in the College have been overcome the Governors will consider the possibility of reopening the Secondary Department of the School.

Rivers (Scotland) Pollution Act, 1951

Mr. Rankin: asked the Secretary of State for Scotland if he has now brought the Rivers (Scotland) Pollution Act, 1951, into full operation.

Mr. Galbraith: The Act is in operation throughout Scotland except for the North and South Esks (in Angus and Kincardineshire), and for tidal waters other than those of the River Forth. An Order giving the local authorities concerned jurisdiction over the Esks is now being made. A draft Order

for the Clyde estuary will be published as soon as the Clyde River Purification Board are in a position to operate the Act there.

Mr. Rankin: In view of the fact that the Under-Secretary of State tells us that the Act is now in operation throughout nearly the whole of Scotland, why is it that most of the Scottish rivers are still dirtier than they were before the coming into operation of the Act? Can he say what he is doing to get river boards to do the job for which they were appointed?

Mr. Galbraith: I should not like to accept that the rivers are necessarily dirtier than they were before.

Mr. Rankin: Yes.

Mr. Galbraith: I recognise and agree with the hon. Member that it is a great problem involving a lot of technical difficulties. My right hon. Friend's Department is pressing the various river purification boards to get on with it as fast as they can.

Mr. Rankin: He has bad ten years to deal with these technical difficulties. Can the hon. Member promise that in the next ten years, if he still has the power, he will solve them?

Mr. Galbraith: I will certainly promise to do the best I can. I can encourage the hon. Member by saying that we expect a report from the Clyde River Purification Board towards the end of the year—

Mr. Rankin: Which year?

Mr. Galbraith: This year—and my right hon. Friend hopes to publish a draft Order soon thereafter.

Schoolchildren (Educational Cruises)

Mr. Emrys Hughes: asked the Secretary of State for Scotland to what extent he will give financial assistance to Scottish county councils in order to provide for special educational cruises for schoolchildren.

Mr. Brooman-White: Expenditure by education authorities on such cruises is accepted as relevant expenditure for the assessment of general grant.

Mr. Hughes: Can the hon. Gentleman assure us, in view of the very successful


results of these educational cruises and in view of the fact that some of the progressive education authorities like Ayrshire are contemplating hiring a liner for their own schoolchildren, that he will give every possible encouragement to those local authorities?

Mr. Brooman-White: We have been doing so.

Glasgow Overspill Population (New Town)

Mr. McInnes: asked the Secretary of State for Scotland if he is now in a position to indicate the location of another new town to deal with Glasgow's overspill population.

Mr. Galbraith: My right hon. Friend has at the moment nothing to add to the reply which he gave to the hon. Member on this subject on 19th May, but hopes to be able to make a statement in the near future.

Mr. McInnes: Is the hon. Gentleman aware that the need for this new town is not in dispute, but for the past two years I have been seeking to get some indication from him as to its location? Why this unwarrantable delay? What does he mean when he says, "My right hon. Friend will give a statement shortly"?

Mr. Galbraith: I mean exactly what I say.

Registration of Title to Land (Committee)

Mr. McInnes: asked the Secretary of State for Scotland when the Reid Committee on Registration of Title to Land was appointed; and when he expects to receive their report.

Mr. Brooman-White: The Committee was appointed in September, 1959. I cannot say when it will submit its report.

Mr. McInnes: Has the hon. Gentleman consulted the Chairman of the Committee to find out when he is likely to produce the report?

Mr. Brooman-White: I know Lord Reid and his colleagues are well aware of the anxiety that they should produce the report with the minimum of delay.

Mr. McInnes: I asked the hon. Gentleman, has he consulted the Chairman of the Committee?

Mr. Brooman-White: This is a very difficult matter. [HON. MEMBERS: "Oh."] We do not want to urge Lord Reid and his Committee, who are well aware of the need to get on with the job, to do it in a way which they consider unsatisfactory.

Mr. T. Fraser: Will not the hon. Gentleman answer the question? Has he consulted Lord Reid or has he not? Why cannot the hon. Gentleman answer the question?

Mr. Brooman-White: I have no knowledge of recent consultation with Lord Reid.

Salmon (Drift Net Fishing)

Mr. Hendry: asked the Secretary of State for Scotland if he is aware that there has been a considerable increase in drift net fishing for salmon within Scottish territorial waters, and that operators of stake nets have organised private patrols which have intercepted boats within one mile off-shore; and what new measures he has now decided to take to ensure the maintenance of law and order.

Mr. Leburn: I am aware that there has been a recent increase in drift netting for salmon off the Tay and in the Montrose area. Fishing for salmon within one mile of low water mark in such areas without the written consent of the person having the fishing rights is a statutory offence and is a matter for the District Fishery Board and the police in which my right hon. Friend has no authority to intervene.

Mr. Hendry: As it would appear from reports in the Press and elsewhere that there is a state of piracy and civil war going on just now on the East Coast of Scotland, would my hon. Friend redouble his efforts to bring an end to this scandalous state of the law?

Mr. Leburn: I am quite sure that we can leave this matter to the District Fishery Boards and to the police.

Oral Answers to Questions — NATIONAL FINANCE

Invisible Earnings

Sir C. Osborne: asked the Chancellor of the Exchequer, since invisible earnings, largely from oil and shipping, fell in the last two years from £229


million to £22 million, and Government expenditure overseas has been on the increase, what steps he is taking to reduce overseas expenditure, especially military expenditure which amounts to over £200 million and so help the balance of payments situation; and if he will make a statement.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): The serious decline in net invisible earnings is a matter for concern, and I am reviewing with my colleagues ways of reducing Government expenditure overseas.

Sir C. Osborne: How big an increase in invisibles does my right hon. and learned Friend expect this year? Does he not think it reasonable to let the Germans defend their own country and pay the expense themselves?

Mr. Lloyd: The whale question of what used to be called "support costs" in Germany is a matter which is under constant discussion and consideration. As to the first part of my hon. Friend's supplementary question, I do not anticipate a substantial increase in net earnings from invisibles this year.

Costs and Prices

Sir C. Osborne: asked the Chancellor of the Exchequer if he is aware that the recent increases in price of bread, beer and tobacco are evidence of growing inflationary pressures, and may themselves encourage further wage demands and thus endanger the stability of sterling; what new steps he is taking to prevent further increases in Government expenditure and to eliminate inflation; and if he will make a statement.

Mr. Selwyn Lloyd: Recent events, including those to which my hon. Friend has referred, have borne out the anxiety expressed in my Budget speech about the rising pressure on costs and prices. My Budget proposals as a whole were designed to restrain this pressure and the new powers in the Finance Bill if granted will enable me to go further if the need arises. The level of Government expenditure has been a matter of continuing concern to me and the long-term review of which I spoke in my Budget speech is now well advanced. In the shorter term I shall make the maximum administrative economies possible. As regards

incomes and prices, responsibility does not rest exclusively with the Government but is shared by bath sides of industry. In general I propose to proceed on the lines laid down in my Budget speech.

Sir C. Osborne: In view of the obvious strain on sterling which will come this autumn and the cross-pressure from further increases in wages and salaries, would my right hon. and learned Friend not try to get both sides of industry to made an appeal for restraint? [Laughter.] Sir Stafford Cripps would not have laughed at a question like that. In order to reinforce the pressure that I am sure he would like to bring on employers and the unions, would my right hon. and learned Friend start on Government expenditure and set a good example?

Mr. Lloyd: There are a number of points raised in my hon. Friend's speech. As for the comparison with Sir Stafford Cripps, there is one precedent which I am certain we shall not follow. As to the business of increasing pressures on sterling, it is not the immediate situation which is causing anxiety but the long-term trends, and it is the long-term trends that we have to get right. I have dealt with the point on Government expenditure in a previous Answer. As for a conference with both sides of industry, my hon. Friend has put forward that suggestion before, but I am perfectly certain that both sides are aware of the considerations put forward and that it is vital if we are to get the long-term trends right that we keep our costs on a competitive basis.

Mr. Jay: In view of the present state of the economy, is it not obvious that the Chancellor's Surtax cuts were disastrous folly? Does the right hon. and learned Gentleman not realise that, having made these cuts, be has no moral authority now to ask for wage restraint?

Mr. Lloyd: The right hon. Gentleman is quite wrong in suggesting that there have been cuts in Surtax. There has been no cut whatever. Nothing will have any consequence in that field until January, 1963. That is the time, and the right hon. Gentleman knows quite well that the reason for those cuts was to stop a disincentive to the effort and initiative which I believe are necessary to get us out of our present situation.

Customs Facilities, Folkestone

Mr. Costain: asked the Chancellor of the Exchequer how many people have passed through Her Majesty's Customs at the Port of Folkestone, both inwards and outwards, during each of the last three years.

Mr. Selwyn Lloyd: With permission, I will circulate the figures in the OFFICIAL REPORT.

Mr. Costain: Does my right hon. and learned Friend realise that the Customs facilities at Folkestone have not been increased or altered for a number of years? Is he aware that they are a disgrace as experienced by people visiting this country? Would my right hon. and learned Friend arrange for them to be inspected so that he can see to it that his staff is working under satisfactory conditions?

Mr. Lloyd: The responsibility for this is that of the British Transport Commission, and I know that the Commission and my right hon. Friend the Minister of Transport are examining the matter urgently.

The following are the figures:


Year
Passengers through Customs at Folkestone


Inwards
Outwards


1958
385,595
347,253


1959
444,277
410,810


1960
452,705
406,661

Oral Answers to Questions — MALAYA, SINGAPORE, SARAWAK, NORTH BORNEO AND BRUNEI

Mr. Brockway: asked the Prime Minister if he will instruct the Secretaries of State for Commonwealth Relations and the Colonies to seek to arrange joint consultations with the Governments of Malaya, Singapore, Sarawak, North Borneo and Brunei with a view to establishing a federation of these territories within the Commonwealth.

The Prime Minister (Mr. Harold Macmillan): I have observed with interest the recent constructive suggestion of the Prime Minister of the Federation

of Malaya that sooner or later the Federation should have an understanding with us and the peoples of Singapore, North Borneo, Brunei and Sarawak on a plan which would bring these territories into closer political and economic association. Tunku Abdul Rahman's statement is already stimulating discussion in these countries and Her Majesty's Government will wish to take their reactions into account in their own consideration of the suggestion.

Mr. Brockway: Will the Prime Minister do all he can to encourage this big, imaginative idea which has been put forward by the Prime Minister of Malaya and endorsed by the Prime Minister of Singapore and which might be a means of overcoming the difficulties of those two countries as well as of uniting Brunei with Sarawak and North Borneo?

The Prime Minister: Yes, Sir, of course these are territories which, as the hon. Member knows well, are in widely different stages of both political and economic development. Therefore, there are considerable problems to overcome, but I think it is a good thing that these matters should have been ventilated, and it is good that each of these territories should have the widest opportunity to consider the proposal.

Mr. Strachey: While appreciating the Prime Minister's point that the initiative must be left to the territories, may I ask whether he would not agree that it is a matter of considerable urgency and that his forthcoming visit to the area in the autumn should be used as an occasion to push this very important matter?

The Prime Minister: I think it is a matter primarily for the territories, but we take a great interest in it. We have certain special interests in Singapore and elsewhere. At this very early stage much good has been done by the raising of the matter and by discussion.

Sir J. Barlow: In view of the importance of the matter, would my right hon. Friend not agree that it is unwise to push it too quickly? Would he not agree that there are great differences in language, religion and race and that while eventually this would be a good thing it would be unwise to push it too quickly?

The Prime Minister: There are, as I have said, very widely differing stages of political and economic development, and obviously there are great problems in going too rapidly to what might not be a successful conclusion of any discussions.

Oral Answers to Questions — GERMANY (FRONTIERS)

Mr. Swingler: asked the Prime Minister if, following his talks with President Kennedy, he will now put forward proposals for the definition and recognition of Germany's frontiers.

The Prime Minister: No, Sir. The attitude of Her Majesty's Government remains as stated in the reply given to the hon. Member for Manchester, Gorton (Mr. Zilliacus) on the 11th November, 1959.

Mr. Swingler: Does the Prime Minister not consider that the Answer to which he has referred was evasive? Why does the Prime Minister say this? Does he consider that the frontiers of Germany at present are in dispute between Britain and countries neighbouring Germany? Why should the right hon. Gentleman in this respect not follow the example of President de Gaulle in declaring recognition of the existing frontiers, thereby subduing the controversy created by the territorial claims made by German Ministers?

The Prime Minister: The view of all our allies, as far as I know, is that Germany should be reunited in conditions which would safeguard all the legitimate interests of Europe as a whole and of Germany's neighbours in particular.

Mr. Swingler: Is the Prime Minister aware that President de Gaulle has declared that he accepts the existing frontiers of Germany as a basis for negotiating about Germany? Would not a declaration by the British Prime Minister to this effect also be a measure for reducing tension without altering the existing situation?

The Prime Minister: I do not think that at this moment this is really the most important issue that we have to face. If we ever get, as I hope we shall, into some kind of negotiation, that is another question.

At present we are being threatened by an ex parte attack on our rights and obligations.

Oral Answers to Questions — DISARMAMENT

Mr. A. Henderson: asked the Prime Minister whether he will insitute a comprehensive inquiry into all the major consequences of general disarmament together with a co-ordination of all departmental studies on this problem.

The Prime Minister: I do not think that any special inquiry by Her Majesty's Government is called for at this stage. The General Assembly of the United Nations on 15th December approved a resolution calling on the Secretary-General to conduct an examination by experts of the economic and social consequences of disarmament. The Secretary-General has now appointed the Expert committee called for in this resolution and it will begin its work on 7th August.

Mr. Henderson: Will the Prime Minister indicate that if the inquiry which the Secretary-General is carrying out is not sufficiently comprehensive as to the effects of general disarmament in this country, he will consider instituting a special inquiry?

The Prime Minister: We have a British expert on the team, and we shall be kept fully informed. I will be frank; I wish I could feel that dealing with the economic results of comprehensive disarmament was the most difficult part of the problem.

Sir C. Osborne: Ought we not to make it clear to those who work in the engineering industry that any general disarmament will mean some short-term unemployment with some widespread unemployment in certain sections until the industry is re-orientated? Ought we not to warn the industry about it?

The Prime Minister: Any form of comprehensive disarmament to which we could possibly agree must come by stages over a period of years. I should have thought that so great would be the relief and so great would be the impetus given to the life of the world that any such problems that arose could well be dealt with.

QUESTIONS TO MINISTERS

Mr. Lipton: On a point of order, Mr. Speaker. Is there any chance of our having an answer to Question No. 43?

Mr. Gaitskell: On a point of order, Mr. Speaker. On 13th June the Prime Minister made a brief statement on the Report of the Romer Committee and announced that he was circulating in the OFFICIAL REPORT a summary of the findings of that Committee, subject to security inhibition.
As the summary was not available, the House was not in a very good position to ask Questions, as I think the Prime Minister realised, because the right hon. Gentleman frequently referred hon. Members to the summary. In these circumstances, and since five or six Questions on this subject have not been reached today, I wonder if I might ask you whether the Prime Minister would wish to answer these Questions together at the end of Questions now. Would that be possible?

Mr. Speaker: This is the end of Questions. The right hon. Gentleman knows the rule to which I have to adhere, namely, that if I have notice of a wish by a Minister to answer a Question if not reached, then I allow that sort of thing; but I cannot really do it otherwise.

Mr. Shinwell: May I ask, Mr. Speaker, whether the Prime Minister would care to answer Question No. 43?

Mr. Speaker: That illustrates the difficulty of the matter.

Mr. Gaitskell: Does this not point once again to the desirability of the Prime Minister answering Questions at a certain time, say 3.15, as was proposed by the Select Committee on Procedure? Could the matter be taken up again with the Government?

Mr. Speaker: I have always tried to do whatever the House wanted about it, but there are conflicting views. I am sorry that we spent so much time in Scotland today. We do better some days than others. It was probably largely my fault today.

Mr. W. Hamilton: You will probably recollect, Mr. Speaker, that two years

ago representations were made that the Minister of Labour, because of the number of Questions addressed to him, should answer Questions on two days a week instead of one day. Would it not meet the case which you have mentioned about Scottish Questions if we did the same with the Secretary of State for Scotland, and had him answering Questions on two days instead of one day?

Mr. Chetwynd: Fridays and Saturdays?

Mr. Speaker: The complexities are obvious to everybody. The more time we spend on the Prime Minister on a day like this, the less we are able to spend in Scotland. The matter tends to complicate itself a little.

Mr. Woodburn: May I remind you, Mr. Speaker, that at the beginning of Questions today other business was taken before Scottish Questions were reached, so it is hardly fair to blame all of it on Scotland?

Mr. Speaker: I do not blame it on Scotland. I blame myself for it largely. It is difficult to know how best to help the House.

Mr. Gaitskell: I am sure you will agree, Mr. Speaker, that the present situation is most unsatisfactory in connection with a very important matter of public interest like the Romer Report. We were not able to ask Questions on it in the ordinary way on a previous occasion. We ought to be able to deal with it fairly expeditiously and not weeks after the Report came out. I would suggest that you should consider this matter. You may not be able to deal with it within the existing rules of order, but it is a matter of great concern to the House as a whole.

Mr. Speaker: It is the sort of matter about which I should hope that the House would help me, because it is a matter about which there will have to be agreement as to what I should seek to do.

Mr. G. Brown: Further to the point of order, Mr. Speaker. I understood you to say that if you were approached by a Minister who expressed a wish to answer a Question after Question Time you sometimes felt able to allow that to


happen. I have twice noticed the Prime Minister leaning forward. Is it reasonable to ask the right hon. Gentleman whether he proposes, in view of what my right hon. Friend has said, to ask permission to answer these Questions? If not, would he like to say what he is running away from?

Hon. Members: Oh.

Mr. Speaker: No, that really is not quite right. I have stated the rule in accordance with which I have to act. It is at once obvious that we must insist upon it, or else all hon. and right hon. Gentlemen with Questions which are not reached may pursue the same course.

Mr. Shinwell: May I have your guidance, Mr. Speaker—

Dame Irene Ward: Further to the—

Mr. Speaker: I will have points of order one at a time, if I may.

Mr. Shinwell: Mr. Speaker, some considerable time ago when we discussed the Report of the Select Committee on Procedure a proposal was made that the Prime Minister might reply to Questions at 3.15. On that occasion the Leader of the House, in reply, said "Let us see how we get on with the present arrangement", because the Prime Minister's Questions were being brought forward to No. 40. Apparently, that is not very satisfactory.
Would you not agree, Mr. Speaker, that apart entirely from what has happened today with Scottish Questions and the like, this happens every time when the Prime Minister is called upon to answer Questions? Would you consider whether it is possible to facilitate an arrangement so that the Prime Minister could answer Questions at 3.15 p.m.?

Mr. Speaker: I should like to work this in any way which the House thinks appropriate. I think that it has been the position in the past that the House virtually dictates to the Speaker what it wants done. I do not propose to take a line of my own in this. I hope that I can have the guidance of the House about it.

Dame Irene Ward: Further to the point of order raised by the Leader of the Opposition, Mr. Speaker. Would it

be in order to ask the Prime Minister whether he would care to make a statement on Thursday after Questions on the gist of the Questions on the Order Paper today so that we could then have an answer to them without all this complication?

Mr. Speaker: No doubt what the hon. Lady has said has been heard, but I could not pretend that it was in order to ask it at this moment.

Mr. Callaghan: Further to the point of order, Mr. Speaker. Could one of the matters that is to be considered be whether the Prime Minister should answer on a third day in the week? Is it not the case that certainly after 1945—I cannot remember for how long—there used to be a third day for the Prime Minister? We should all very much like to hear from the Prime Minister and see him more than we do at present.

Mr. G. Brown: That is going a bit far.

Mr. Speaker: I hope that we shall not have speeches on this subject. I realise that it is a serious problem. I am anxious to get the best arrangement that I can from the point of view of the House.

CORTONWOOD COLLIERY, WOMBWELL

Mr. D. Griffiths (by Private Notice): Mr. D. Griffiths (by Private Notice) asked the Minister of Power the latest position at Cottonwood Colliery where nine men were entombed yesterday evening.

The Parliamentary Secretary to the Ministry of Power (Mr. J. C. George): At 7.30 p.m. yesterday evening there was an outburst of gas at Cottonwood Colliery, Wombwell, in Yorkshire. Nine men were involved: of these, four, unfortunately, succumbed. Of the other five who escaped alive, four were well enough to return home and the other has been detained in hospital for observation. Investigations are proceeding.
I should like to take this opportunity of expressing, on behalf of my right hon. Friend and myself, the deepest sympathy for the relatives and friends of the dead men.

Mr. Griffiths: I should like to join with the hon. Gentleman in the sentiments which he has expressed. I am sure that the whole House has the deepest sympathy with the relatives and friends of the deceased. Whilst we cannot prejudge the matter, will the hon. Gentleman's Department, at the earliest possible moment, get Her Majesty's inspectors to hold the fullest inquiry?

Mr. George: Her Majesty's inspectors were on the scene soon after the disaster and investigations are proceeding. Further steps, if any, and if necessary, will be decided upon in the light of the investigation.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress, 14th June].

[Sir GORDON TOUCHE in the Chair]

New Clause.—(INCREASE OF A PERSONAL RELIEF.)

(1) In section two hundred and ten of the Act of 1952 (Personal relief) for the reference to two hundred and forty pounds there shall be substituted a reference to two hundred and fifty pounds.

(2) This section shall not be deemed to have required any change in the amounts deducted or repaid under section one hundred and fifty-seven (Pay as you earn) of the Act of 1952 before the twenty-second day of June, nineteen hundred and sixty-one.—[Mr. Houghton.]

Brought up, and read the First time.

3.40 p.m.

Mr. Houghton: I beg to move, That the Clause be read a Second time.

The Chairman: I think that it would be for the convenience of the Committee to discuss with this new Clause the two new Clauses—(Increase of personal reliefs)—and—(Additional personal relief for unmarried householders).

Mr. Houghton: As you have said, Sit Gordon, it would be convenient to consider those two new Clauses with the one I am moving.

The Chairman: Order. Will hon. Members be a little more quiet, please?

Mr. Houghton: This new Clause contains a simple proposal to increase the personal allowance for a married man from £240 to £250. It makes no provision for a corresponding increase in the personal allowance of a single person or in the wife's earned income relief.
In the second new Clause we are discussing—(Increase of personal reliefs)—we go further than proposing a relief for a married man. It includes a corresponding increase for the single person and, since the wife's earned income relief is dealt with in Section 210 of the Income Tax Act, 1952, it also covers the corresponding increase in the wife's earned


income relief, the allowance of which is now £140 and which would, under this proposal, become £150.
The last increase in these personal allowances was in 1955, when the personal allowance for a married man was increased from £210 to the present figure of £240, and that of a single person from £120 to £140. It should, however, be pointed out that when these improvements in personal allowances were made the Chancellor of the day modified the reduced rate bands and, by readjustment of reduced rates, took back quite a lot of what he was giving away in increased personal allowances.
The Committee will probably remember that when the Chancellor increased the personal allowances in 1955 he reduced the lower band of taxable income from £100 at the lowest rate to £60 at the lowest rate, and the result was that many people, especially single people, actually paid more tax and not less, even when their personal allowance was increased from £120 to £140.
It is true that these personal allowances have been increased over the last ten years from £180 to £240 in the case of a married man and from £110 to £140 in the case of a single person. Notwithstanding this, the tax liability comes low down the pay scale even today. A single person pays £1 in tax on a wage of £10 a week. A married couple with no children pay 10s. a week tax on a wage of £10 a week, and £1 a week tax on a wage of £12. Wages of £10 a week, or even £12 a week, are below the average wage of industrial workers today, so that the Committee will see that, despite the improvements which have been made in personal allowances and in the reduction of the rates of tax in recent years, Income Tax attacks the pay packet low down.
Indeed, Income Tax becomes payable, in the case of a single person, on pay beyond £180 a year—which is very low—and, in the case of a married couple, on pay beyond £309 a year—which is also very low in the scale of earnings today. If we were to look at these personal allowances in relation to the fall in the value of money, we should discover that these personal reliefs should be very much higher than they are. In terms of pre-war money values, a single person's allowance would be as high

as £280, and a married man's personal allowance would be as high as £506 instead of £140 and £240 respectively as at present.
Of course, there is no principle of taxation which says that personal reliefs shall rise as the value of money falls. All I am doing is to suggest that, despite much that has been said about tax reductions in recent years, the level of taxation is still fairly high in relation to pre-war days. The cost of this proposal is surprisingly high, which shows the large number of people who would be affected by this very modest improvement.
After all, a lift of £10 in personal allowance means that the maximum relief for Income Tax would be £3 17s. 6d. a year. That is a very small amount. It is neither here nor there in terms of the tax paid by a great many people. It would additionally benefit a number of Surtax payers because, as the Committee knows, personal reliefs over and above the single person's allowance are set off against Surtax. Thus, there would be a small additional relief for Surtax payers—which is scarcely the direct intention of our proposal. However, before the Bill finally leaves the House, it may be possible for us to moderate the reliefs which are included already for the Surtax payers.
The large number of people concerned sends up the total cost to the Exchequer considerably. From Answers given to Questions which I asked a few months ago, I judge that the cost of the first new Clause would be £22 million in tax in a full year, while the cost of the second new Clause would be £57 million in a full year, which would bring the total cost of the reliefs proposed to approximately the same amount that the Chancellor is proposing to give to Surtax payers for the years 1961–62 onwards.
Having explained to the Committee what these proposals do and what they would cost, I wish to say a little more about the general background to them. We have three groups of proposed improvements in tax reliefs and personal allowances in connection with this Finance Bill. The first we dealt with very late last Thursday night. Those were the changes which we really hoped the Chancellor would feel able to make,


because they dealt with age exemption, small incomes relief and age relief at a total cost of probably not more than £4 million, which we thought could be met within the general strategy which the Chancellor is deploying in the Bill. However, the Chancellor remained quite firm that he could not make any of the concessions which we sought last Thursday.
How much less able will he be today, therefore, to meet the proposals which we are now making and which will cost not £4 million, but nearly £84 million? That would be about the total cost, reckoning wife's earned income relief as well as married and single personal allowances, as proposed in the Clauses. Later, we shall come to our third batch of proposals, which will deal with a section of secondary reliefs much less costly, but, nevertheless, quite formidable from the Chancellor's point of view.
I am bound to say that this batch of new Clauses is a demonstration against the wholly excessive Surtax reliefs granted in the Bill for operation in 1963, because we still believe that they are excessive if considered on grounds of equity, and misconceived if intended to give a dynamic boost to the economy.
I want to be as conciliatory as possible and to offer to the Chancellor the same operative date for these proposals, if that will help him, as he is giving to the Surtax reliefs. Only a few moments ago I heard the right hon. and learned Gentleman protesting that he had not made any reliefs from Surtax yet and that they would not become operative until Surtax for the year became payable on 1st January, 1963. But the Chancellor is overlooking the fact that Surtax payers can begin to spend more of their incomes in the year 1961–62, because they will have less Surtax to pay on 1st January, 1963.

Mr. Gerald Nabarro: Mr. Gerald Nabarro (Kidderminster) indicated dissent.

Mr. Houghton: The hon. Member for Kidderminster (Mr. Nabarro) is shaking his head so violently that it will fall off in a moment.

Mr. Nabarro: Mr. Nabarro rose—

Mr. Houghton: No. The hon. Member will have to continue to shake for a moment or two longer.
What I am saying is that the prudent Surtax payer saves up to pay Surtax when it becomes due, because he receives the money before the tax becomes payable. If he is a prudent man, as most Surtax payers are—I know that many go to the bank for an overdraft to pay their Surtax, but many save against the day—he will not have to save up so much as before and he will, therefore, have more for spending or investing, more free income.
I offer to the Chancellor that any change in the new Clauses should become operative on a date to coincide with the date of operation of the Surtax reliefs. I know that this would be an enormous promissory note on the Chancellor's budgetary provision in a couple of years, and that it would be a hazardous thing to do, having regard to the general state of the economy, but if the Chancellor can make promissory notes for the Surtax payer, without any assurance that that will be rewarding to the economy, he has no excuse for not making a similar promissory note to people much lower down.
What the Chancellor hopes to get out of his proposals is some tangible additional benefit to the economy. He is putting the admittedly influential and, for the most part, capable and often brilliant people in the Surtax range under a very heavy obligation to the nation. If the Surtax concessions fail in that respect, they will prove to be unjustified, but I draw the Committee's attention to the fact that in making the distinction between those in the Surtax range and those below it the Chancellor is putting forward a proposal carrying disturbing implications.
By concentrating more relief on 400,000 Surtax payers than he will be willing to give to 12 million or 15 million ordinary taxpayers under the new Clauses, he is leaving the great mass of workers who pay tax, but not Surtax, with the feeling that they do not matter, or, at least, that they do not matter as much as their managers, their supervisors, their technicians, their bosses. Perhaps individually, man for man, being a modest chap the ordinary worker would not claim to be the equal of many of the brilliant people in the Surtax range, but collectively the ordinary workers matter as much, and,


I would say, matter a great deal more. We see evidence every day that if industrial relations fail and break down, all the skill and all the genius of managers and executives cannot save the country from grievous damage.
The Chancellor has matched his concessions to Surtax payers by imposing additional tax on the profits of industry. Presumably, the theory behind that is that the Chancellor has given the top man a substantial pay increase and is calling upon the shareholders to pay the money.

Viscount Hinchingbrooke: On a point of order. Is it in order for an hon. Member to put down Clauses and get them called, but then to argue not on the basis of their merits, but to use them as a blind or cover for a discussion of an issue already decided by the Committee?

The Chairman: I did not think that the hon. Member for Sowerby (Mr. Houghton) was doing that.

Mr. Houghton: Thank you, Sir Gordon. Hon. Members opposite must be rather duller than usual this afternoon.
I am arguing the relative merits al these proposals against those made by the Chancellor. I am about to argue that if the Chancellor can impose an additional 2½ per cent. Profits Tax on industry to pay Surtax reliefs, he can impose a further 2½ per cent. Profits Tax on industry for more general reliefs. If the 2½ per cent. additional Profits Tax to pay for Surtax reliefs, taken with the reliefs themselves, is to be of benefit to the economy, I am trying to show that there is every bit as much evidence behind my theory that another 2½ per cent. with wider-spread reliefs would be a greater boost to the economy.
4.0 p.m.
I hope that I have succeeded in bringing myself back into order, if I was ever out of order. I know that the noble Lord is always willing to help me in these difficult matters, and I can see that he is listening attentively to my arguments.
The Chancellor may say, "This is all very well, but to give tax reliefs to the many will stimulate consumer demand just at a time when I do not want it, whereas tax reliefs to the few, although equal in amount and just as heavy a

charge on the Exchequer, will be likely to lead to more saving and not to more spending". I do not think that there is any evidence to support that view either. It is difficult to say who is saving what at the moment. There is evidence to suggest that the great mass of the people are saving more, and with additional tax reliefs they would probably be stimulated to put aside still more.
The Chancellor may say that he could not, in any case, permit himself to such substantial reliefs in advance, but he has done it for Surtax payers. Why can he not do it for the rest? What makes him so sure about the results that he will get from the Surtax payers, and less sure about what he will get from everyone else? What is this magic which has lured him into this enormous cut in Surtax reliefs, but which, at the same time, has made him as stubborn as ever against providing reliefs lower down?
If the Chancellor can compel industry to underwrite his confidence in managers to the tune of another £84 million a year, why can he not call on them to underwrite equal confidence in the workers? This is the simple, relative point which I am putting to the Chancellor. I will not repeat the comment which my right hon. Friend the Member for Battersea, North (Mr. Jay) made during Question Time a few minutes ago, but there is no doubt that the reliefs which the Chancellor is giving to Surtax payers is disturbing to those who are conscious of the welfare of those much lower down.
Had the Chancellor's Budget statement ended just before he proposed the drastic Surtax cuts, we on this side of the Committee would have felt that his budgetary strategy made a coherent policy at this juncture in our economic affairs, and it would have been much more difficult for us to propose some of these improvements which we have felt impelled to put forward.
We have to deal with the Chancellor's proposals as they are but, even taking the necessity, from his point of view, of giving Surtax reliefs, what a call to arms he would have had had he declared that our economy was socially and industrially indivisible, and that alongside reliefs to Surtax payers there would be reliefs to all other wage and salary earners. He could have put the whole


nation on its toes instead of dividing it as he has done by these proposals. He could have called for a big, national heave to get the country out of the economic trough into which it is now gradually sinking.
The Chancellor is enterprising and imaginative, but his imagination and enterprise have played him false. I still have hopes, but he could have said, "This time, we will have tax reliefs by results". That would have been a new and magical appeal to the country. He could have put all his tax reliefs forward and said, "According to the justification that you give me for my confidence in the recuperative powers of the nation you shall have these reliefs, but if you fail me I shall have to withdraw them when the time comes". That would have put the country on its toes. The Chancellor is giving this relief willy-nilly to Surtax payers. He hopes that they will give him some economic reward. He has given everyone else a disappointing slap in the face.
That is our case in favour of the new Clauses. I do not know what is passing through the Chancellor's mind, but I suppose that in the middle of June all Chancellors of the Exchequer wonder whether they made the right sort of Budget statement in the middle of April. This afternoon, the Chancellor seems to be more than usually confident that what he said in April still holds good, but I do not know whether his hands are itching to grasp the economic regulators which he has put into the Bill. Is he having second thoughts on what he has promised to the Surtax payers?

The Chairman: Order. The hon. Member is going rather far from the new Clauses.

Mr. Houghton: Thank you, Sir Gordon, for arresting me on a crescendo of eloquence.
I accept that I was straying a little beyond the new Clauses, but the merits of them go far beyond the financial detail within them. As I said before, they are a demonstration, and it is impossible to have a demonstration without carrying one's case far beyond the narrow confines of the new Clauses.

The Economic Secretary to the Treasury (Mr. Anthony Barber): The three new Clauses which have been

explained by the hon. Member for Sowerby (Mr. Houghton) are all concerned with increases in personal reliefs.
The first new Clause would increase a married man's personal allowance from £240 to £250 while leaving the other allowances unaltered.
The second new Clause would do the same thing, but, in addition, would increase a single person's allowance from £140 to £150, and would also increase the maximum figure for the wife's earned income allowance by the same amount, from £140 to £150.
I do not think that the Committee would wish me to deal in detail with the third new Clause in the name of the hon. Lady the Member for Leeds, South-East (Miss Bacon), as she is not here.
On a number of occasions during the last few weeks my right hon. and learned Friend has explained the reasoning behind his Budget proposals. I do not propose now to go over the same ground again. Nobody in his right senses would deny that at the time of the Budget there was excessive pressure on home demand, and nothing that has happened since throws doubt on the wisdom of my right hon. and learned Friend's appreciation of the situation at that time.

Mr. Nabarro: My hon. Friend referred to the pressure on home demand. Was not a survey published by the Federation of British Industries, 48 hours ago, showing that a number of firms were not working to capacity at present? How does my hon. Friend reconcile that survey with his statement about pressure on home demand? Is he not mistaking the symptoms? Is not the correct symptom the pressure of wage demands on costs and prices, which is an entirely different proposition?

Mr. Barber: No, Sir. I cannot accept what my hon. Friend says. I would have to go into considerable detail to convince him that the appreciation made by my right hon. and learned Friend was correct at the time of the Budget, and still is correct. I must not go into details about the economic situation, or I shall get into trouble with you, Sir Gordon.
The point is that that was the appreciation of my right hon. and learned Friend at the time of the Budget, and it was in order to deal with that situation


that he provided for an above-the-line surplus of £506 million. To achieve that it was necessary for him to propose to the Committee a net increase of £68 million in taxation this year.
The second Clause, also in the name of the right hon. Member for Huyton (Mr. H. Wilson), incorporates the proposal contained in the first one. If the second were to be accepted it would wipe out the greater part of the net increase in taxation which was proposed by my right hon. and learned Friend. It must be apparent to the Committee that, quite apart from the merits of the proposals, there are overwhelming economic reasons for rejecting them this year. It is fair to add that, if we were to provide taxation relief of about £60 million in a full year, even the hon. Member for Sowerby would probably not seriously contend that these proposals should necessarily have first priority.
I was surprised that the hon. Member referred at such length to the Surtax reliefs which figured in my right hon. and learned Friend's Budget proposals. On the assumption that the hon. Member's arguments were not meant deliberately to deceive the Committee—and I would never accuse the hon. Member for Sowerby of doing that—I can only assume that they are the consequence of muddled thinking. When all the somewhat devious reasoning which he put forward has been considered, the fact remains that these Clauses would involve a substantial cost to the Exchequer this year.
The second new Clause would involve a loss of £48 million to the Exchequer this year, whereas the Surtax reliefs will not cost the Exchequer a penny. Furthermore, as the hon. Member pointed out, by far the greater part of the Surtax relief is covered by the increase in Profits Tax. If I heard him aright he was proposing yet a further increase in Profits Tax of 2½ per cent. to cover his proposals, and I found that a little surprising.

Mr. Douglas Jay: Do we understand that the Chancellor is now getting cold feet about his Surtax reliefs, and may be proposing to withdraw them before next year?

Mr. Barber: I do not see the point of that intervention. Nothing that I

have said casts the slightest doubt on the proposals which my right hon. and learned Friend has made. The point is that in any consideration of personal reliefs which would result in a loss to the Exchequer this year the Surtax reliefs which will result in no loss this year have no relevance.

Mr. Houghton: I said that to assist the Chancellor we would be ready to post-date these additional reliefs to coincide with those he has given to the Surtax payers, in which case there would be no charge to the Exchequer this year from these new Clauses. I made that suggestion quite plainly.

Mr. Barber: That is not the purport of the Clauses. If the hon. Member wishes to achieve that purpose he can take the obvious way out and put down similar Clauses next year, when they can be considered again.
But it is relevant to consider the way in which these allowances have increased over the years. The married allowance, which was £180 from 1946 to 1950, was increased to £190 in 1951, to £210 in 1952–53, and to £240 in 1955. There was a similar increase of £30 in respect of the single person's allowance between 1951 and 1955. The hon. Member was critical of the fact that in 1955 there was a narrowing of the first reduced rate "band", because the effect—disregarding the relief provided through the reduction in the rates of tax in the same Budget—was to take back, except from those who paid very small amounts of tax, part or, in some cases, the whole of the benefits derived from the increase in personal allowances.
4.15 p.m.
I do not want to waste time in going into this matter in detail, but two points are highly relevant. First, as the hon. Member knows, the purpose of the changes made in 1955 in this way was to carry out the suggestion of the Royal Commission on the Taxation of Profits and Income that the starting point of liability for individuals was too low and ought to be raised—but in such a way as not to benefit people with higher incomes. Secondly, taking the whole 1955 Budget into account, every taxpayer paid less Income Tax than he would have if that Budget had made no change at all in tax rates and allowances.
Any further relief from taxation is attractive, but a great deal has already been done. I have some figures here, but I shall not weary the Committee with them; I ask hon. Members who are interested in the matter to read an Answer given to the right hon. Member for Huyton on 20th March this year. The right hon. Gentleman asked for figures which would show what percentage of income was taken in tax, on a basis which would enable a given gross income in 1951 to be compared with the income at the present day having the same purchasing power.
The Answer is very illuminating, and I am not sure that it was the Answer which the right hon. Gentleman expected. It showed that in every case the tax liability, as a percentage of income—allowing for the rise in the cost of living—was reduced. These lower percentages which come out in the Answer are partly the consequence of the increased personal allowances made over the years.
The cost of the new Clause in the name of the hon. Member for Leeds, South-East alone would, according to the interpretation of the word "householder", be anything from £20 million to £50 million in the present year. Whether or not the other two Clauses are desirable in themselves; whether or not, in any year when there could be some substantial remission of taxation, they should have priority, the fact remains that to provide for reliefs this year on the scale suggested would run counter to the basic purpose of my right hon. and learned Friend's Budget. Indeed, in fairness to the hon. Member, he virtually admitted at one point that he thought he had little chance of success with these Clauses. He said that they were little more than a demonstration. Because of their high cost, if for no other reason, I must ask the Committee to reject them.

Mr. Anthony Crosland: The reply of the Economic Secretary demands some comment. The hon. Gentleman has based the whole of his case on the assumption that when the Chancellor framed his Budget we were in a period of such excess demand that concessions costing £84 million—as the hon. Gentleman has admitted that

the proposals in these Clauses would cost—cannot be envisaged by the Chancellor. I ask the Economic Secretary to consider the implications of this statement, that we have such a condition of excess demand in this country that no further concessions of any character can be made.
Two comments ought to be made. The first is that which was made in an intervention by the hon. Member for Kidderminster (Mr. Nabarro), that this statement is inconsistent with the findings of the recent F.B.I. survey, which showed a high degree of non-utilisation of capacity in a large proportion of British industry. The second and, I suggest, the very much more serious implication in saying that we have such an excess demand is that for twelve months there has been no increase in production in the British economy, no natural growth of any kind.
If, after twelve months of no increase in production, we have excess demand, I should like to know whether this means that all the new investment undertaken during those twelve months yielded no return of any kind. Has there been no increase of productivity and industrial efficiency? That is the implication of saying that after twelve months of stagnant production we have an excess demand.
The Economic Secretary must face this if he proposes to use that argument as the main reason for not accepting these new Clauses, and no doubt later for refusing other concessions which hon. Members on this side of the Committee will be urging on him. He must face the fact that the argument that after 12 months of stagnant production we have excess demand implies that all our investment during that period has been wasted, that there is no natural increase in efficiency and productivity in the system.
The implications are such that they could not possibly be accepted by any Chancellor of the Exchequer. So I wish to insist that the major reason for rejecting this and other concessions is one of excess demand in April when the Chancellor framed his Budget is not consistent with the facts about the British economy, and I hope that if the hon. Gentleman is proposing to resist further new Clauses and proposals he will use


a rather more plausible and ingenious argument.

Mr. Nabarro: Before we part with this new Clause I wish to put one or two questions to my hon. Friend the Economic Secretary which, I hope, he will answer now or possibly, as it is equally in order, in the debate on the next new Clause to be called.
The Income Tax allowance for a wife is £100 per annum. The Income Tax allowance for a child up to and including 11 years is £100 per annum. The Income Tax allowance for a child between 12 and 15 years inclusive is £120 per annum. The Income Tax allowance for children wholly engaged in educational pursuits and over the age of 16 years is £150 per annum. So the children are graduated for Income Tax allowances at £100, £120 and £150 per annum. The wife allowance is £100 per annum, only. That is nonsense. A wife is much more valuable than any child, and much more expensive. That ought to be recognised by the Treasury which has permitted allowances for Income Tax purposes, as between children of varying ages, and the allowance for a wife for Income Tax purposes, to become badly out of relation to one another.
In the figure of £250 mentioned in the first of the proposed new Clauses, it is, of course, implicit that there is still an allowance of only £100 for the wife. I hope that the Economic Secretary will give us some hope, in his remarks on this or the ensuing new Clause, that some measure of reform may be expected in the future regarding the disparity which the figures I have just quoted obviously reveal.

Mr. Barber: First, may I take up the point made by the hon. Member for Grimsby (Mr. Crosland). It is extremely difficult, without going into the matter in great detail, at a time when one in dealing with proposals to increase personal allowances, to convince those hon. Members who do not accept the fact that there is considerable overstrain in the economy at present. Of course, it is perfectly true, as the hon. Gentleman said, and as was indicated earlier by my hon. Friend the Member for Kidderminster (Mr. Nabarro) that some industries are working below capacity. But, taking the country as a whole and looking at the

various economic indicators, I should have thought that there is no doubt at all that the view taken by my right hon. and learned Friend at the time of the Budget was amply justified and has been vindicated by subsequent events, and by the figures which we now have available.
The hon. Member for Grimsby asked how it was that in these circumstances our economy did not seem to be growing, or had not grown significantly over the past twelve months. Again, I cannot, on this occasion, go into the matter in detail. But, as the hon. Gentleman knows full well from his great experience of economic matters, there are many reasons which might account for this. I will mention only one, and I do not for a moment suggest that it is the most important. With all the new machinery at our disposal, as the result of a considerable increase in investment by productive industry, it is a fact that recently there have been cuts in the number of hours worked. In itself, this is bound to affect the total productive output. There are other reasons, some of them may be more important and others less. But I am sure that. I should not be in order were I to go into those aspects at any great length.
To my hon. Friend the Member for Kidderminster, who made a particular point about the relativity between various personal allowances, I can only say on this occasion that one of the primary considerations which my right hon. and learned Friend and his predecessors have always had to bear in mind in considering what ought to be done about personal allowances is the way in which an increase in one personal allowance has, as it were, a consequence regarding other personal allowances.
As I understand, my hon. Friend is saying that he thinks that the allowances are out of line and that this fact ought to be borne in mind on any occasion when my right hon. and learned Friend did feel able to make some concessions in respect of personal allowances. I will certainly bear that in mind and I know that my right hon. and learned Friend will take note of what has been said by my hon. Friend the Member for Kidderminster.

Mr. Nabarro: May I get this straight? All I am asking my hon. Friend to do is to convey to the Chancellor of the


Exchequer, who was not present when I was speaking, the importance—in a fiscal sense—of holy matrimony, and to divorce it for the moment—in a fiscal sense—from the allowances for children.
Since 1951, the Conservative Party has applied itself, conscientiously and rightly, to a progressive increase of children's allowances for Income Tax purposes. Speaking from memory, I think that the child allowance was £70 when the Conservative Party came to office in 1951. Now the allowances amount to the three figures which I have given. But nothing has been done about the wife allowance. As a wife is such an expensive asset, surely the wife should rank first. I said that the wife was an expensive asset and the word "asset" is perfectly right. The wife should rank first, and so should any improvement of the allowance given to her spouse in respect of his wife for Income Tax purposes.

Mr. Barber: I am not sure whether my hon. Friend is now proposing that there should be some form of capital allowance for a wife. But I know, from my private conversations with my hon. Friend, that he and I take much the same sort of view about women, and I will convey his observations to my right hon. and learned Friend.

4.30 p.m.

Mr. G. R. Mitchison: It is not for me to investigate the fiscal divorce of holy matrimony—an operation no doubt carefully considered in Conservative circles, but one which I could not hope even to describe. I was a trifle amused by the Economic Secretary warning us solemnly against muddled thinking. Perhaps he did not realise some of the things which were to follow.
I suppose that if we are to push this business about the wife and the child a little further we shall have to consider how expensive an asset one is oneself. What we are describing deals, it is true, with personal allowances, but the real question put before us is: at what point do we begin taxing single persons and married people? These are only allowances made by some bit of muddled thinking no doubt by those who originally prepared the Income Tax Acts. The question we have to consider is very simple. Are we justified, in present cir

cumstances—and those we must consider in comparison with the rest of this Finance Bill—in refusing to increase the amount of income of the comparatively poor man which escapes taxation?
I agree that it applies over the whole belt of incomes, but the real importance of this and the number of people principally concerned are matters which have to do with the bottom of the belt of Income Taxpayers. They are the vast majority of people. The reason why this would be an expensive change, even to the very limited and modest extent which my hon. Friend proposed, is simply the numbers of people who would be affected. What is so violently wrong, not merely in the refusal of this proposal, but with the complete failure of the Chancellor to do anything about this until nearer the next General Election, is that, at the same time, he is proposing to make very considerable concessions to the directly opposite class of people—the small, not large, number of people who pay, and are in a position to pay, a considerably larger, not smaller, amount of tax.
It is an almost classic case of Tory philosophy. It is Tory philosophy, apparently, to make this concession to the Surtax payer and to refuse, at the same time, to make any concession to the bottom dog in the Income Tax world. That is what the refusal of this proposal means. It is muddled thinking to try to confuse this, as the Economic Secretary did, with the question of timing. If he had chosen to look at the merits of the case he could even have avoided all those difficulties by considering what had been put to him verbally. He would not do that. He preferred to try to work up a defence on questions of timing, knowing perfectly well that on any view of social justice no defence whatever was possible for a refusal to accept this new Clause or the omission to move anything of the sort in the Finance Bill.
It is monstrous that at a time when we are still supposed to be moderately prosperous—although that appears to be getting more and more doubtful every day, so we are told—this concession should be made, whatever the dating of it, to Surtax payers, the best friends, no doubt, of the Tory Party, and the Tory Party should refuse to support a proposal in favour of a far larger group of


people who, quite clearly, if there is anything going, ought to have a much better claim and a much earlier claim than that of Surtax payers.
It is monstrous to try to get out of this on minor matters of timing. The right way of looking at this was to suppose that people put aside money for paying Surtax when they knew that the Surtax would be due to be paid later. That is ordinary prudence and a course to be encouraged, but that is all that could be said and that was all it was when it was a matter of defending the proposals in the Budget. This is not a question of being able to afford it, or of upsetting the balance of the Budget or anything of that sort. It is merely a question of deliberately preferring to make a concession to the fairly rich to making a concession to the far larger number of people who, I repeat, are at the bottom of the scale.
Think about those people. They get £3 a week for a single person and £5 a week for a married couple. What is the social justice or sense in taxing people like that? What is the social justice or sense in refusing to help them when the Government are doing the other things in this field?
This, of course, is a question of principle, but it is not a try-on, as was suggested by one hon. Member after another. It is an attempt—I agree, obviously a hopeless attempt—to make the party opposite understand that there is some social content even in a Finance Bill.

Mr. Percy Holman: I add my appeal to the Treasury Bench on this matter. I speak for an area which is traditionally poorer than most of the rest of London. The effect of not increasing the personal allowances at this time will be detrimental to the poorer elements in our community.
By its refusal to accept these proposals, the Treasury is, in effect, increasing the number of taxpayers among the poorest in the country. An old-age pensioner

now receiving a pension somewhat increased since the beginning of April, and going out to earn, finds that the maximum allowed for a man under 70 or a woman under 65 is now brought within the tax range. Our proposal is ultra-modest. It would increase personal allowance only from £240 to £250 for a married couple and would not obviate all this increased group of pensioners and others on very low incomes from once again coming within the range of those who pay Income Tax, but it would at any rate mitigate the hardship.

Mr. T. L. Iremonger: Are not the people of wham the hon. Member is speaking exempt under the provisions for relief in respect of small incomes?

Mr. Holman: They are not exempt, for only their pension is treated as earned income. There are manufacturers who are finding that part-timers whom they are employing, among them these pensioners, are now becoming liable to pay Income Tax although they were not liable to do so last year. That sort of thing alone should justify the Government in making a concession along the lines of personal reliefs.
There is another reason why personal relief should be increased this year. In only twelve months the cost of living index has risen by four points. It is not far off 4 per cent., and 4 per cent. on £240 is, as near as possible £10. Every forecast indicates that the cost of living will go up another two or three points during the next twelve months. The Government should meet the position which is arising. I plead with the Treasury Bench to give this matter second thoughts and to come down on the side of same relief in personal allowances in order to avoid increasing hardship for the elderly and other low-income groups.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 180, Noes 226.

Division No. 208.]
AYES
[4.39 p.m.


Ainsley, William
Boardman, H.
Butler, Mrs. Joyce (Wood Green)


Allaun, Frank (Salford, E.)
Bowden, Herbert W. (Leics, S.W.)
Callaghan, James


Allen, Scholefield (Crewe)
Boyden, James
Castle, Mrs. Barbara


Bacon, Miss Alice
Braddock, Mrs. E. M.
Chapman, Donald


Baxter, William (Stirlingshire, W.)
Brockway, A. Fenner
Chetwynd, George


Bence, Cyril
Broughton, Dr. A. D. D.
Craddock, George (Bradford, S.)


Benson, Sir George
Brown, Rt. Hon. George (Belper)
Cronin, John


Blyton, William
Butler, Herbert (Hackney, C.)
Crosland, Anthony




Cullen, Mrs. Alice
Johnson, Carol (Lewisham, S.)
Reid, William


Darling, George
Jones, Dan (Burnley)
Reynolds, G. W.


Deer, George
Kelley, Richard
Roberts, Albert (Normanton)


de Freitas, Geoffrey
Kenyon, Clifford
Roberts, Goronwy (Caernarvon)


Diamond, John
Key, Rt. Hon. C. W.
Robertson, John (Paisley)


Dodds, Norman
King, Dr. Horace
Robinson, Kenneth (St. Pancras, N.)


Donnelly, Desmond
Ledger, Ron
Ross, William


Driberg, Tom
Lee, Frederick (Newton)
Shinwell, Rt. Hon. E.


Dugdale, Rt. Hon. John
Lever, L. M. (Ardwick)
Short, Edward


Ede, Rt. Hon. C.
Lewis, Arthur (West Ham, N.)
Silverman, Julius (Aston)


Edelman, Maurice
Logan, David
Silverman, Sydney (Nelson)


Edwards, Robert (Bilston)
Mabon, Dr. J. Dickson
Skeffington, Arthur


Edwards, Walter (Stepney)
McCann, John
Slater, Mrs. Harriet (Stoke, N.)


Evans, Albert
MacColl, James
Slater, Joseph (Sedgefield)


Fernyhough, E.
McInnes, James
Small, William


Fitch, Alan
McKay, John (Wallsend)
Smith, Ellis (Stoke, S.)


Fletcher, Eric
Mackie, John (Enfield, East)
Sorensen, R. W.


Foot, Michael (Ebbw Vale)
McLeavy, Frank
Soskice, Rt. Hon. Sir Frank


Fraser, Thomas (Hamilton)
MacPherson, Malcolm (Stirling)
Spriggs, Leslie


Gaitskell, Rt. Hon. Hugh
Manuel, A. C.
Steele, Thomas


Ginsburg, David
Mapp, Charles
Stewart, Michael (Fulham)


Gooch, E. G.
Marquand, Rt. Hon. H. A.
Stonehouse, John


Gordon Walker, Rt. Hon. P. C.
Marsh, Richard
Stones, William


Gourlay, Harry
Mason, Roy
Strachey, Rt. Hon. John


Greenwood, Anthony
Mayhew, Christopher
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Grey, Charles
Millan, Bruce
Swingler, Stephen


Griffiths, David (Rother Valley)
Milne, Edward J.
Sylvester, George


Griffiths, Rt. Hon. James (Llanelly)
Mitchison, G. R.
Symonds, J. B.


Grimond, J.
Monslow, Walter
Taylor, Bernard (Mansfield)


Hale, Leslie (Oldham, W.)
Moody, A. S.
Taylor, John (West Lothian)


Hall, Rt. Hn. Glenvil (Colne Valley)
Mort, D. L.
Thompson, Dr. Alan (Dunfermline)


Hamilton, William (West Fife)
Moyle, Arthur
Thomson, G. M. (Dundee, E.)


Hannan, William
Mulley, Frederick
Thornton, Ernest


Hart, Mrs. Judith
Neal, Harold
Timmons, John


Hayman, F. H.
Noel-Baker, Francis (Swindon)
Tomney, Frank


Henderson, Rt. Hn. Arthur (Rwly Regis)
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Ungoed-Thomas, Sir Lynn


Herbison, Miss Margaret
Oliver, G. H.
Wainwright, Edwin


Hill, J. (Midlothian)
Oram, A. E.
Warbey, William


Hilton, A. V.
Owen, Will
Wells, Percy (Faversham)


Holman, Percy
Paget, R. T.
Whitlock, William


Holt, Arthur
Pannell, Charles (Leeds, W.)
Wilkins, W. A.


Houghton, Douglas
Parker, John
Willey, Frederick


Howell, Charles A. (Perry Barr)
Parkin, B. T.
Willis, E. G. (Edinburgh, E.)


Hoy, James H.
Pavitt, Laurence
Wilson, Rt. Hon. Harold (Huyton)


Hughes, Emrys (S. Ayrshire)
Pearson, Arthur (Pontypridd)
Winterbottom, R. E.


Hughes, Hector (Aberdeen, N.)
Peart, Frederick
Woodburn, Rt. Hon. A.


Hunter, A. E.
Pentland, Norman
Woof, Robert


Hynd, H. (Accrington)
Popplewell, Ernest
Yates, Victor (Ladywood)


Irvine, A. J. (Edge Hill)
Prentice, R. E.
Zilliacus, K.


Janner, Sir Barnett
Price, J. T. (Westhoughton)



Jay, Rt. Hon. Douglas
Probert, Arthur
TELLERS FOR THE AYES:


Jager, George
Proctor, W. T.
Mr. G. H. R. Rogers and


Jenkins, Roy (Stechford)
Rankin, John
Mr. Lawson.



Redhead, E. C.





NOES


Agnew, Sir Peter
Carr, Compton (Barons Court)
Errington, Sir Eric


Allan, Robert (Paddington, S.)
Carr, Robert (Mitcham)
Farey-Jones, F. W.


Arbuthnot, John
Cary, Sir Robert
Finlay, Graeme


Balniel, Lord
Channon, H. P. G.
Fisher, Nigel


Barber, Anthony
Chichester-Clark, R.
Fraser, Ian (Plymouth, Sutton)


Barter, John
Clark, William (Nottingham, S.)
Freeth, Denzil


Batsford, Brian
Clarke, Brig, Terence (Portsmth, W.)
Gammans, Lady


Baxter, Sir Beverley (Southgate)
Cleaver, Leonard
Glover, Sir Douglas


Beamish, Col. Sir Tufton
Cooke, Robert
Glyn, Dr. Alan (Clapham)


Bell, Ronald
Cooper-Key, Sir Neill 
Glyn, Sir Richard (Dorset, N.)


Bennett, Dr. Reginald (Gos &amp; Fhm)
Cordeaux, Lt.-Col. J. K.
Goodhew, Victor


Berkeley, Humphry
Contain, A. P.
Grant, Rt. Hon. William


Bidgood, John C.
Coulson, J. M.
Grant-Ferris, Wg Cdr. R.


Birch, Rt. Hon. Nigel
Courtney, Cdr. Anthony
Green, Alan


Bishop, F. P.
Craddock, Sir Beresford
Grosvenor, Lt.-Col. R. G.


Black, Sir Cyril
Crosthwaite-Eyre, Col. O. E.
Hall, John (Wycombe)


Bossom, Clive
Cunningham, Knox
Hamilton, Michael (Wellingborough)


Bourne Arton, A.
Currie, G. B. H.
Harris, Frederic (Croydon, N.W.)


Boyle, Sir Edward
Dalkeith, Earl of
Harrison, Brian (Maldon)


Braine, Bernard
d'Avigdor-Goldsmid, Sir Henry
Harvey, Sir Arthur Vere (Macclesf'd)


Brewis, John
Digby, Simon Wingfield
Harvie Anderson, Miss


Brooman White, R.
Donaldson, Cmdr. C. E. M.
Hastings, Stephen


Browne, Percy (Torrington)
Duncan, Sir James
Hay, John


Bryan, Paul
Eccles, Rt. Hon. Sir David
Heald, Rt. Hon. Sir Lionel


Buck, Antony
Eden, John
Henderson, John (Cathcart)


Burden, F. A.
Elliot, Capt. Walter (Carshalton)
Hendry, Forbes


Butcher, Sir Herbert
Elliott, R.W. (Nwcstle upon-Tyne, N.)
Hiley, Joseph


Campbell, Sir David (Belfast, S.)
Emmet, Hon. Mrs. Evelyn
Hill, J. E. B. (S. Norfolk)


Campbell, Gordon (Moray &amp; Nairn)









Hirst, Geoffrey
Marshall, Douglas
Sharples, Richard


Holland, Philip
Marten, Neil
Shaw, M.


Hollingworth, John
Mathew, Robert (Honiton)
Skeet, T. H. H.


Hornsby-Smith, Rt. Hon. Patricia
Matthews, Gordon (Meriden)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)


Howard, Hon. G. R. (St. Ives)
Mawby, Ray
Smithers, Peter


Howard, John (Southampton, Test)
Maxwell-Hyslop, R. J.
Spearman, Sir Alexander


Hughes-Young, Michael
Mills, Stratton
Speir, Rupert


Hulbert, Sir Norman
Montgomery, Fergus
Stanley, Hon. Richard


Hurd, Sir Anthony
More, Jasper (Ludlow)
Stevens, Geoffrey


Iremonger, T. L.
Morrison, John
Steward, Harold (Stockport, S.)


Irvine, Bryant Godman (Rye)
Nabarro, Gerald
Stodart, J. A.


James, David
Nicholson, Sir Godfrey
Stoddart-Scott, Col, Sir Malcolm


Jenkins, Robert (Dulwich)
Noble, Michael
Studholme, Sir Henry


Johnson, Eric (Blackley)
Nugent, Sir Richard
Summers, Sir Spencer (Aylesbury)


Johnson Smith, Geoffrey
Oakshott, Sir Hendrie
Tapsell, Peter


Kerby, Capt. Henry
Orr, Capt. L. P. S.
Taylor, Sir Charles (Eastbourne)


Kerr, Sir Hamilton
Osborn, John (Hallam)
Taylor, Edwin (Bolton, E.)


Kirk, Peter
Osborne, Cyril (Louth)
Teeling, William


Kitson, Timothy
Page, John (Harrow, West)
Temple, John M.


Lagden, Godfrey
Page, Graham (Crosby)
Thomas, Leslie (Canterbury)


Langford-Holt, J.
Partridge, E.
Thompson, Kenneth (Walton)


Leather, E. H. C.
Pearson, Frank (Clitheroe)
Thornton-Kemsley, Sir Colin


Leavey, J. A.
Peel, John
Tiley, Arthur (Bradford, W.)


Leburn, Gilmour
Percival, Ian
Turner, Colin


Legge-Bourke, Sir Harry
Peyton, John
van Straubenzee, W. R.


Lewis, Kenneth (Rutland)
Pickthorn, Sir Kenneth
Vaughan-Morgan, Sir John


Lindsay, Martin
Pike, Miss Mervyn
Vickers, Miss Joan


Linstead, Sir Hugh
Pilkington, Sir Richard
Vosper, Rt. Hon. Dennis


Litchfield, Capt. John
Pitt, Miss Edith
Wakefield, Edward (Derbyshire, W.)


Lloyd, Rt. Hon. Selwyn (Wirral)
Pott, Percivall
Walder, David


Longden, Gilbert
Powell, Rt. Hon. J. Enoch
Walker, Peter


Loveys, Walter H.
Price, David (Eastleigh)
Wall, Patrick


Lucas, Sir Jocelyn
Prior-Palmer, Brig. Sir Otho
Ward, Dame Irene


Lucas-Tooth, Sir Hugh
Proudfoot, Wilfred
Watkinson, Rt. Hon. Harold


McAdden, Stephen
Pym, Francis
Webster, David


MacArthur, Ian
Quennell, Miss J. M.
Whitelaw, William


McLaren, Martin
Ramsden, James
Williams, Paul (Sunderland, S.)


Maclay, Rt. Hon. John
Rawlinson, Peter
Wills, Sir Gerald (Bridgwater)


Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)
Redmayne, Rt. Hon. Martin
Wilson, Geoffrey (Truro)


MacLeod, John (Ross &amp; Cromarty)
Rees, Hugh
Wise, A. R.


McMaster, Stanley R.
Rees-Davies, W. R.
Woodhouse, C. M.


Macmillan, Rt. Hn. Harold (Bromley)
Renton, David
Woodnutt, Mark


Macmillan, Maurice (Halifax)
Ridsdale, Julian
Woollam, John


Macpherson, Niall (Dumfries)
Robertson, Sir D. (C'thn's &amp; S'th'ld)
Worsley, Marcus


Maddan, Martin
Robinson, Sir Roland (Blackpool, S.)
Yates, William (The Wrekin)


Maginnis, John E.
Ropner, Col. Sir Leonard



Markham, Major Sir Frank
Russell, Ronald
TELLERS FOR THE NOES:


Marlowe, Anthony
Seymour, Leslie
Colonel Sir H. Harrison and




Mr. Gibson-Watt.

New Clause.—(INCREASE OF PERSONAL RELIEFS.)

(1) In section two hundred and ten of the Act of 1952 (Personal relief)for the reference to two hundred and forty pounds there shall be substituted a reference to two hundred and fifty pounds and for the references to one hundred and forty pounds there shall be substituted references to one hundred and fifty pounds.

(2) This section shall not be deemed to have required any change in the amounts deducted

or repaid under section one hundred and fifty-seven (Pay as you earn) of the Act of 1952 before the twenty-second day of June, nineteen hundred and sixty-one.—[Mr. Mitchison.]

Brought up, and read the First time.

Motion made, and Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 182, Noes 235.

Division No. 209.]
AYES
[4.48 p.m.


Ainsley, William
Callaghan, James
Ede, Rt. Hon. C.


Allaun, Frank (Salford, E.)
Castle, Mrs. Barbara
Edelman, Maurice


Allen, Scholefield (Crewe)
Chapman, Donald
Edwards, Robert (Bilston)


Bacon, Miss Alice
Chetwynd, George
Edwards, Walter (Stepney)


Baxter, William (Stirlingshire, W.)
Craddock, George (Bradford, S.)
Evans, Albert


Bence, Cyril
Cronin, John
Fernyhough, E.


Benson, Sir George
Crosland, Anthony
Fitch, Alan


Blyton, William
Cullen, Mrs. Alice
Fletcher, Eric


Boardman, H.
Darling, George
Foot, Michael (Ebbw Vale)


Bowden, Herbert W. (Leics. S.W.)
Davies, Rt. Hn. Clement (Montgomery)
Fraser, Thomas (Hamilton)


Boyden, James
Deer, George
Gaitskell, Rt. Hon. Hugh


Braddock, Mrs. E. M.
de Freitas, Geoffrey
Ginsburg, David


Brockway, A. Fenner
Diamond, John
Gooch, E. G.


Broughton, Dr. A. D. D.
Dodds, Norman
Cordon Walker, Rt. Hon. P. C.


Brown, Rt. Hon. George (Belper)
Donnelly, Desmond
Gourlay, Harry


Butler, Herbert (Hackney, C.)
Driberg, Tom
Greenwood, Anthony


Butler, Mrs. Joyce (Wood Green)
Dugdale, Rt. Hon. John
Grey, Charles




Griffiths, David (Rother Valley)
MacPherson, Malcolm (Stirling)
Silverman, Julius (Aston)


Griffiths, Rt. Hon. James (Llanelly)
Manuel, A. C.
Skeffington, Arthur


Grimond, J.
Mapp, Charles
Slater, Mrs. Harriet (Stoke, N.)


Hate, Leslie (Oldham, W.)
Marquand, Rt. Hon. H. A.
Slater, Joseph (Sedgefield)


Hall, Rt. Hn. Glenvil (Colne Valley)
Marsh, Richard
Small, William


Hamilton, William (West Fife)
Mason, Roy
Smith, Ellis (Stoke, S.)


Hannan, William
Mayhew, Christopher
Sorensen, R. W.


Hart, Mrs. Judith
Millan, Bruce
Soskice, Rt. Hon. Sir Frank


Hayman, F. H.
Milne, Edward J.
Spriggs, Leslie


Henderson, Rt. Hn. Arthur (Rwly Regis)
Mitchison, G. R.
Steele, Thomas


Herbison, Miss Margaret
Monslow, Walter
Stewart, Michael (Fulham)


Hill, J. (Midlothian)
Moody, A. S.
Stonehouse, John


Hilton, A. V.
Mort, D. L.
Stones, William


Holman, Percy
Moyle, Arthur
Strachey, Rt. Hon. John


Holt, Arthur
Mulley, Frederick
Strauss, Rt. Hn. G. R. (Vauxhall)


Houghton, Douglas
Neal, Harold
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Howell, Charles A. (Perry Barr)
Noel-Baker, Francis (Swindon)
Swingler, Stephen


Hoy, James H.
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Sylvester, George


Hughes, Emrys (S. Ayrshire)
Oliver, G. H.
Symonds, J. B.


Hughes, Hector (Aberdeen, N.)
Oram, A. E.
Taylor, Bernard (Mansfield)


Hunter, A. E.
Owen, Will
Taylor, John (West Lothian)


Hynd, H. (Accrington)
Paget, R. T.
Thompson, Dr. Alan (Dunfermline)


Irvine, A. J. (Edge Hill)
Pannell, Charles (Leeds, W.)
Thomson, G. M. (Dundee, E.)


Janner, Sir Barnett
Parker, John
Thornton, Ernest


Jay, Rt. Hon. Douglas
Parkin, B. T.
Timmons, John


Jeger, George
Pavitt, Laurence
Tomney, Frank


Jenkins, Roy (Stechford)
Pearson, Arthur (Pontypridd)
Ungoed-Thomas, Sir Lynn


Johnson, Carol (Lewisham, S.)
Peart, Frederick
Wainwright, Edwin


Jones, Dan (Burnley)
Pentland, Norman
Warbey, William


Keller, Richard
Popplewell, Ernest
Wells, Percy (Faversham)


Kenyon, Clifford
Prentice, R. E.
White, Mrs. Eirene


Key, Rt. Hon. C. W.
Price, J. T. (Westhoughton)
Whitlock, William


King, Dr. Horace
Probert, Arthur
Wilkins, W. A.


Ledger, Ron
Proctor, W. T.
Willey, Frederick


Lee, Frederick (Newton)
Rankin, John
Willis, E. G. (Edinburgh, E.)


Lever, L. M. (Ardwick)
Redhead, E. C.
Wilson, Rt. Hon. Harold (Huyton)


Lewis, Arthur (West Ham, N.)
Reid, William
Winterbottom, R. E.


Logan, David
Reynolds, G. W.
Woodburn, Rt. Hon. A.


Mabon, Dr. J. Dickson
Roberts, Albert (Normanton)
Woof, Robert


McCann, John
Roberts, Goronwy (Caernarvon)
Yates, Victor (Ladywood)


MacColl, James
Robertson, John (Paisley)
Zilliacus, K.


McInnes, James
Robinson, Kenneth (St. Pancras, N.)



McKay, John (Wallsend)
Ross, William
TELLERS FOR THE AYES:


Mackie, John (Enfield, East)
Shinwell, Rt. Hon. E.
Mr. G. H. R. Rogers and


McLeavy, Frank
Short, Edward
Mr. Lawson.




NOES


Agnew, Sir Peter
Cleaver, Leonard
Goodhew, Victor


Allan, Robert (Paddington, S.)
Cole, Norman
Grant, Rt. Hon. William


Arbuthnot, John
Cooke, Robert
Grant-Ferris, Wg Cdr. R.


Balniel, Lord
Cooper-Key, Sir Neill
Green, Alan


Barber, Anthony
Cordeaux, Lt.-Col. J. K.
Grosvenor, Lt.-Col. R. G.


Barlow, Sir John
Corfield, F. V.
Hall, John (Wycombe)


Barter, John
Costain, A. P.
Hamilton, Michael (Wellingborough)


Batsford, Brian
Coulson, J. M.
Harris, Frederic (Croydon, N.W.)


Baxter, Sir Beverley (Southgate)
Courtney, Cdr. Anthony
Harrison, Brian (Maldon)


Beamish, Col. Sir Tufton
Craddock, Sir Beresford
Harvey, Sir Arthur Vere (Macclesf'd)


Bell, Ronald
Critchley, Julian
Harvie Anderson, Miss


Bennett, Dr. Reginald (Gos &amp; Fhm)
Crosthwaite-Eyre, Col. O. E.
Hastings, Stephen


Berkeley, Humphry
Cunningham, Knox
Hay, John


Bidgood, John C.
Curran, Charles
Heald, Rt. Hon. Sir Lionel


Birch, Rt. Hon. Nigel
Currie, G. B. H.
Henderson, John (Cathcart)


Bishop, F. P.
Dalkeith, Earl of
Hendry, Forbes


Black, Sir Cyril
d'Avigdor-Goldsmid, Sir Henry
Hiley, Joseph


Bossom, Clive
Digby, Simon Wingfield
Hill, J. E. B. (S. Norfolk)


Bourne-Arton, A.
Donaldson, Cmdr. C. E. M.
Hirst, Geoffrey


Boyle, Sir Edward
Duncan, Sir James
Holland, Philip


Braine, Bernard
Duthie, Sir William
Hollingworth, John


Brewis, John
Eccles, Rt. Hon. Sir David
Hornsby-Smith, Rt. Hon. Patricia


Brooman-White, R.
Eden, John
Howard, Hon. G. R. (St. Ives)


Browne, Percy (Torrington)
Elliot, Capt. Walter (Carshalton)
Howard, John (Southampton, Test)


Bryan, Paul
Elliott, R.W. (Nwcstle-upon-Tyne, N.)
Hughes-Young, Michael


Buck, Antony
Emmet, Hon. Mrs. Evelyn
Hulbert, Sir Norman


Burden, F. A.
Errington, Sir Eric
Hurd, Sir Anthony


Butcher, Sir Herbert
Farey-Jones, F. W.
Iremonger, T. L.


Campbell, Gordon (Moray &amp; Nairn)
Finlay, Graeme
Irvine, Bryant Godman (Rye)


Carr, Compton (Barons Court)
Fisher, Nigel
James, David


Carr, Robert (Mitcham)
Fraser, Ian (Plymouth, Sulton)
Jenkins, Robert (Dulwich)


Cary, Sir Robert
Freeth, Denzil
Johnson, Eric (Blackley)


Channon, H. P. G.
Gammans, Lady
Johnson Smith, Geoffrey


Chichester-Clark, R.
Gardner, Edward
Kerby, Capt. Henry


Clark, Henry (Antrim, N.)
Glover, Sir Douglas
Kerr, Sir Hamilton


Clark, William (Nottingham, S.)
Glyn, Dr. Alan (Clapham)
Kirk, Peter


Clarks, Brig. Terence (Portsmth, W.)
Glyn, Sir Richard (Dorset, N.)
Kitson, Timothy







Lagden, Godfrey
Nugent, Sir Richard
Stevens, Geoffrey


Langford Holt, J.
Oakshott, Sir Hendrie
Steward, Harold (Stockport, S.)


Leather, E. H. C.
Orr, Capt. L. P. S.
Stodart, J. A.


Leavey, J. A.
Orr-Ewing, C. Ian
Stoddart-Scott, Col. Sir Malcolm


Leburn, Gilmour
Osborn, John (Hallam)
Studholme, Sir Henry


Legge-Bourke, Sir Harry
Osborne, Cyril (Louth)
Summers, Sir Spencer (Aylesbury)


Lewis, Kenneth (Rutland)
Page, John (Harrow, West)
Tapsell, Peter


Lindsay, Martin
Page, Graham (Crosby)
Taylor, Sir Charles (Eastbourne)


Linstead, Sir Hugh
Partridge, E.
Taylor, Edwin (Bolton, E.)


Litchfield, Capt. John
Pearson, Frank (Clitheroe)
Teeling, William


Lloyd, Rt. Hon. Selwyn (Wirral)
Peel, John
Temple, John M.


Longden, Gilbert
Percival, Ian
Thomas, Leslie (Canterbury)


Loveys, Walter H.
Peyton, John
Thompson, Kenneth (Walton)


Lucas, Sir Jocelyn
Pickthorn, Sir Kenneth
Thompson, Richard (Croydon, S.)


Lucas-Tooth, Sir Hugh
Pike, Miss Mervyn
Thornton-Kemsley, Sir Colin


McAdden, Stephen
Pilkington, Sir Richard
Tiley, Arthur (Bradford, W.)


MacArthur, Ian
Pitt, Miss Edith
Turner, Colin


McLaren, Martin
Pott, Percivall
van Straubenzee, W. R.


McLaughlin, Mrs. Patricia
Powell, Rt. Hon. J. Enoch
Vaughan-Morgan, Sir John


Maclay, Rt. Hon. John
Price, David (Eastleigh)
Vickers, Miss Joan


Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)
Prior-Palmer, Brig. Sir Otho
Vosper, Rt. Hon. Dennis


MacLeod, John (Ross &amp; Cromarty)
Proudfoot, Wilfred
Wakefield, Edward (Derbyshire, W.)


McMaster, Stanley R.
Pym, Francis
Walder, David


Macmillan, Rt. Hn. Harold (Bromley)
Quennell, Miss J. M.
Walker, Peter


Macmillan, Maurice (Halifax)
Ramsden, James
Wall, Patrick


Macpherson, Niall (Dumfries)
Rawlinson, Peter
Ward, Dame Irene


Maddan, Martin
Redmayne, Rt. Hon. Martin
Watkinson, Rt. Hon. Harold


Maginnis, John E.
Rees, Hugh
Webster, David


Markham, Major Sir Frank
Rees Davies, W. R.
Whitelaw, William


Marlowe, Anthony
Renton, David
Williams, Paul (Sunderland, S.)


Marshall, Douglas
Ridsdale, Julian
Wills, Sir Gerald (Bridgwater)


Marten, Neil
Robinson, Sir Roland (Blackpool, S.)
Wilson, Geoffrey (Truro)


Mathew, Robert (Honiton)
Ropner, Col. Sir Leonard
Wise, A. R.


Matthews, Gordon (Meriden)
Russell, Ronald
Woodhouse, C. M.


Mawby, Ray
Seymour, Leslie
Woodnutt, Mark


Maxwell-Hyslop, R. J.
Sharples, Richard
Woollam, John


Mills, Stratton
Shaw, M.
Worsley, Marcus


Montgomery, Fergus
Skeet, T. H. H.
Yates, William (The Wrekin)


More, Jasper (Ludlow)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)



Morrison, John
Smithers, Peter
TELLERS FOR THE NOES:


Nabarro, Gerald
Spearman, Sir Alexander
Colonel Sir H. Harrison and


Nicholson, Sir Godfrey
Speir, Rupert
Mr. Gibson-Watt.


Noble, Michael
Stanley, Hon. Richard

New Clause.—(INCREASE OF RELIEF IN RESPECT OF CHILDREN NOT OVER THE AGE OF ELEVEN.)

(1) In subsection (1) (a) of section two hundred and twelve of the Act of 1952 (amounts of relief in respect of children) for the reference to one hundred pounds there shall be substituted a reference to one hundred and ten pounds.

(2) This section shall not be deemed to have required any change in the amounts deducted or repaid under section one hundred and fifty-seven (Pay as you earn) of the Act of 1952 before the twenty-second day of June, nineteen hundred and sixty-one.—[Mr. Houghton.]

Brought up, and read the First time.

Mr. Houghton: I beg to move, That the Clause be read a Second time.

The Temporary Chairman (Mr. W. R. Williams): It may be for the convenience of the Committee if we take with this new Clause those in the name of the right hon. Member for Huyton (Mr. H. Wilson)—(Incapacitated child over the age of sixteen years)—and—(Increase of relief for claimant depending on services of a daughter)—and that in the name of the hon. Member for Nottingham, South (Mr. W. Clark)—(Children).

Mr. Houghton: It will be convenient, as you say, Mr. Williams, to take these new Clauses together.
I must not be taken as endorsing the proposal contained in the new Clause in the name of the hon. Member for Nottingham, South (Mr. W. Clark). It introduces a new principle into child relief which we on this side of the Committee would find it difficult to accept, quite apart from the administrative difficulties, which I assure the hon. Gentleman are very considerable indeed. Therefore, my remarks will relate to the other three new Clauses.
The first one that I have moved proposes to increase the lowest tier of child allowances from £100 to £110. I suppose that right away I shall be in conflict with the hon. Member for Kidderminster (Mr. Nabarro), who, in remarks made a few moments ago, suggested that in terms of Income Tax relief we were valuing children too high or wives too low, whichever way he likes to put it.

Mr. Nabarro: I protest at once. We are not valuing children too highly. Emphatically, we are under-valuing the most priceless asset—a wife.

5.0 p.m.

Mr. Houghton: I am sure that the Committee is grateful to the hon. Member for making his position even more clear than it was before.
I suggest, however, that it is not suitable to look at reliefs for a wife and for children as if they were related on terms of equality or of independent valuation. One has to look at the child relief as being for the second dependant of the taxpayer. The first child is the second dependant, the second child is the third dependant, and so on. So that an escalator is provided in the structure of child relief for children of different ages.
The new Clause relates only to the child under the age of 11. It does not propose to change the reliefs for children over that age. The hon. Member for Kidderminster gave his figures from memory and he may be forgiven for being slightly mistaken in the relief for the child between the ages of 12 and 15. It is £125.

Mr. Nabarro: That was a slip of the tongue. It should, of course, be £125, as the hon. Member points out.

Mr. Houghton: I make that correction only so that we can get the structure clear in our minds. It is £110, £125 and £150, the last of these being confined to children over 16 who are undergoing full-time education.
We know that in recent years, the child reliefs have been substantially increased. Since 1951, the child allowance for a child under 11 has been increased by 40 per cent., from £70 to £100. For a child between 12 and 16, the increase has been 80 per cent., from £70 to £125.

Mr. Nabarro: It is not quite 80 per cent.

Mr. Houghton: For the over-16s, it has been over 100 per cent., from £70 to £150. I am dealing with approximations. These are spectacular increases, but we think that an adjustment should now be made in the lower tier of child relief, because it is there that the smallest percentage increase has taken place.
In the context of this Finance Bill, we know that we cannot ask for the moon. We can ask for only a very small slice of the moon, and even then we get turned down. One word whose meaning

the Opposition have really learned is "perseverance". This is the thirteenth Finance Bill on which I have tried to secure improvements and reliefs. All I have to show for these thirteen Finance Bills is a doubling of the penalty on an obscure misdemeanour in the tax law which I got last year.
I do not suppose that anybody has suffered either the lower penalty or the higher one since, and I do not hand that achievement down to posterity as being any particular contribution to social welfare. I am trying to do a bit now, but there sits the Financial Secretary with his brief prepared and his instructions. I know that I am knocking my head against a brick wall, but in the House of Commons one has to go on doing it.
I believe that years ago, one of my late hon. Friends who was the Member for Leigh, Lancashire, moved a new Clause concerning housekeeper relief or dependent relative allowance year after year and at long last somthing happened. I do not suppose that I shall be able to persevere long enough to achieve some of the things I have been moving in the last thirteen years. Our proposed improvement in the child relief is a modest one. We know that only modest improvements are possible, if any at all, this year. That is why we have left out children who already qualify for relief of £125 and £150, respectively.
The position of the child in our community has become of increasing importance in recent years. The whole nation has realised more than it did in generations past the priceless asset that we have in our young people, the men and women of tomorrow. In all our welfare arrangements and in our tax allowances, increasing emphasis has been put on the welfare of children and provision has been made for parents to take better care of them.
The hon. Member for Kidderminster referred to the increases in child allowance which have been given in recent years. It is true that in 1952, when we had a flat-rate child allowance of £70 for all children irrespective of age, it was put up to £85, and in 1955, again, the flat-rate allowance of £85 was put up to another flat rate of £100. Then, in 1957, the differential was introduced of higher allowances for older children.
It is the turn of the younger children now to have some slight benefit having regard to their exclusion from the Chancellor's bounty in 1957. In that year, the allowance for the younger child was left where it was. It was the allowances for the older children that were improved. The £100 allowance which we now have for the younger child was in operation in 1957 and had been since 1955. So that no improvement in the child allowance for the youngest child has been made since 1955.
The amount of tax relief that this proposal would bring to the parents is obviously small, but the total cost, as in all these things, would be relatively high. I am not sure what it would be. It might be £8 million. Having witnessed the fate of Amendments to the Bill costing much less than £8 million, I fear that that alone may be regarded by the Chancellor as disqualifying the new Clause from his favourable consideration this year.
I shall not digress on the general background to the budgetary position this year—I did that in moving the last set of new Clauses—and I shall not examine the current economic situation, which is obviously causing anxiety all round. What I do say, however, is that there is something radically wrong either with the Chancellor's budgetary strategy or with his treatment of the House of Commons if we have to go through the long and tedious hours on the Finance Bill with no concession whatever.
There has been one concession. The horticultural lobby, in formidable force on the benches opposite, intimidated the Chancellor into giving way, but it cost him only a few hundred thousand pounds. Our proposal to exempt the poor country folk from having to pay additional tax on the paraffin for their lamps, their cookers, their hurricane lamps and things like that, was rejected because it would cost £4 million. Therefore, all that there is to show for the tedious trundling of the Finance Bill through the Committee of the House is a slight concession to the horticularal lobby, concentrated, as it is, in particular constituencies where the full force of electoral influence could be brought to bear.

The Temporary Chairman: I took the hon. Gentleman at his word when he

said that he would not digress. I am sure that he wants to keep his word.

Mr. Houghton: You may rely on my word absolutely, Mr. Williams. I have concluded that most relevant digression.
If, out of an above-the-line surplus of £506 million, which is estimated for in the Bill, the Chancellor has not left himself room to manoeuvre, then I think that he is treating this Committee very badly. I should have thought that any Chancellor of the Exchequer would hold something in reserve in order to test the feeling of the Committee and to see what impressed it most among a selection of candidates for additional reliefs. But it is not to be. When we made no headway on age exemption, that seemed to set the keynote of our discussions on the new Clauses.
I will pass from the straight child relief or the lower tier of child allowance to the incapacitated child who is dealt with in the new Clause entitled—(Incapacitated child over the age of sixteen years.) This is a matter which has been before the Committee on previous occasions. What we propose is based on the recommendation of the Royal Commission on the Taxation of Profits and Income, in paragraph 193 of its second Report. We discussed this matter in 1954, 1956, 1957, 1958, 1959 and 1960. This suggests that it has had a good airing in recent years. But we still persevere with it.
What the new Clause proposes to do is to give to a parent of a totally incapacitated child the same tax relief as applies to a child over the age of 16 who is undergoing full-time education. Up to the age of 16 an incapacitated child is covered for child allowance in the same way as a normal child. The condition of undergoing full-time education applies only at the age of 16. Beyond that age the child allowance of £150 to the parent is dependent on the child undergoing full-time education. But we think that in the case of a totally incapacitated child the burden on the parent justifies some relief to him corresponding witch the relief in respect of a normal child who stays at school after the age of 16.
In the past, Treasury Ministers have argued two points against this proposal. The first is that an incapacitated child over 16 is in the nature of a dependent


relative and that, since the allowance for a dependent relative is very much smaller than the allowance of £150 proposed in the new Clause, it would be difficult to give this relief in respect of an incapacitated without consequential claims that allowances for dependent relatives should be increased. I do not accept that argument, nor did the Royal Commission.
5.15 p.m.
The next argument advanced against our proposal is that a child over 16 years is entitled to National Assistance in his own right irrespective of the means of the parent and that National Assistance payments might be made to a totally incapacitated child over 16 even though his father is a Surtax payer. There is no family means test, no means test of the parent, to enable a child in this condition to qualify for a National Assistance payment in his own right. I fully accept that. But, as I have argued on previous occasions, I doubt whether to say to a parent, "Your son or daughter can go to the National Assistance Board and get assistance" is any answer to his point that some tax relief should be given in respect of such children.
I know that at the age of 16 a child would normally get 32s. a week from the Assistance Board and, at the age of 18, 38s. plus a share of the family rent up to a maximum of 15s. At the age of 21, the normal allowance would be 49s. 6d. a week. These grants would be lower if the child had any income in his own right apart from the Assistance payments. They are not taxable, so that the parent cannot complain that an Assistance payment to his child would increase his own tax burden.
However, I submit to the Committee what I think is a well understood distaste of parents who are taxpayers at the idea of their children going to the Assistance Board. Rightly or wrongly, they do not feel that Assistance payments are intended far their children, having regard to their own family circumstances. I think that that feeling should not be despised or even criticised. It is a natural feeling which any of us in this Committee would have in similar circumstances. I think that it would be regarded as proper that some tax relief should be given rather than that application for help should be made to the Assistance Board.
If the Chancellor of the Exchequer looked favourably on this idea, it would be possible so to draft the position that a parent could have one or the other but not both—not a tax relief and his child go to the National Assistance Board. From the point of view of the grand account of the nation, it does not really matter whether the help comes from the Assistance Board or through the medium of taxation relief. We are frequently too rigid in our attitude to the position of the Exchequer in the background of all these things. I know that it is tidy to keep everything in its proper compartment, but, looking at the matter logically and generally, I think that relief can be given by way of taxation as an alternative to relief through the Assistance Board.
Of course, in certain circumstances, a child may wish to have financial independence up to a point even though it comes from the Assistance Board. The tax relief is to the parent, not to the child. I understand that difference, too. But this is a recommendation of the Royal Commission which has not so far been accepted by the Government. I know that we are tempted to quote recommendations of a Royal Commission when they suit our purpose and to leave them aside when they do not.

Mr. Nabarro: Hear, hear.

Mr. Houghton: But the Chancellor of the Exchequer, like the Financial Secretary, has been just as guilty as any hon. Member on this side in quoting Royal Commissions in his favour. I therefore hope that after so many discussions on this subject we may get a rather more favourable response this time. I know that I have said nothing new. What I have said has been said before either by me or by some of my hon. Friends on previous occasions.

Mr. Nabarro: It is still very good.

Mr. Houghton: I am much obliged to the hon. Gentleman. Praise from him is praise indeed. The Financial Secretary may have nothing new to say in reply, although I wish it were conceivable that he had.
Finally, I pass to the third of the proposed new Clauses—Increase of relief for claimant depending on services of a daughter—in the name of my right hon.


Friend the Member for Huyton (Mr. H. Wilson) and other hon. Friends, which has nothing to do with child relief. It concerns the services of a daughter. This is an obscure relief in the tax code and I think that in these days very few taxpayers indeed are able to avail themselves of it. It is a special relief to a taxpayer who himself is incapacitated and who relies on the services of a daughter for care and attention. The relief given is tax on £40. We propose that it should become £50.
The amount of relief was raised from £25 to £40 in 1953, after remaining at £25 for thirty-three years, which shows that there is no very strong lobby of incapacitated fathers in this House who are dependent upon the services of a daughter; otherwise, more would have been heard of the demand for improvement in this relief much earlier than 1953.
It was in 1953 that my hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine) moved this improvement from £25 to £40, and the Chancellor accepted it. But the Financial Secretary will, no doubt, tell the Committee that something has happened since then. The Royal Commission Report came out after that, and the Financial Secretary is going to lean as heavily on the Report of the Royal Commission as he will lean on the Dispatch Box to say that the Royal Commission did not like this relief. It said that there was no justification for it. It recommended instead a special allowance for gravely disabled taxpayers themselves, irrespective of whether they depended upon the services of a daughter. But that is another recommendation of the Royal Commission that the Government have not accepted.
I know that the Royal Commission said that this allowance in respect of the services of a daughter was capricious and anomalous because it was quite accidental whether a taxpayer had a daughter who could render this service. Admittedly the relief does depend on having a daughter who can render this service, in just the same way that housekeeper relief depends on being able to get a housekeeper to look after one's children.
Under one of the housekeeper reliefs it is necessary to have a female relative

as a housekeeper, and if one cannot persuade a niece or a cousin or some other member of the family to be a housekeeper one does not qualify for housekeeper relief under that provision. We know that these reliefs are anomalous in the sense that it depends on whether the conditions exist which qualify a person for them. One might almost say that it is accidental as to whether or not one is totally incapacitated. Certainly the misfortunes of life are themselves capricious; we have to deal with them when we meet them, and this relief is one of those occasions.
I do not think it is good administration for the Financial Secretary to say that, having regard to the Report of the Royal Commission, this relief is now virtually obsolete. If he is going to say that this relief is obsolete, like the 10s. paid to the 10s.-widow, and that therefore there is no case for doing any more about it, I think that the Committee should take a hand in exercising cautionary discipline on the hon. Gentleman. This relief is in existence. The relief is given subject to one having the qualifications for it. It is given to a few people who deserve it if they qualify, and we think that it should now be increased slightly.
There is one thing that the Chancellor cannot say about this third proposed new Clause. He cannot say that it will wreck his Budget. He cannot say that the economy will come unstuck. He cannot say that the surplus above the line will be reduced below £500 million, because it will not under this proposal. It is a relief which will cost him only a matter of scores of thousands. Why, I would almost expect him to have the money on him now. For him to take refuge in all the patter about pressure on home demand, budgetary strategy and all the rest of it would be very unworthy of the Chancellor or the Financial Secretary, who is to reply.
It may be, if rumour is any guide, that this may be one of the last occasions on which the hon. Gentleman will have the opportunity of coming to favourable terms with the Committee on a Finance Bill. Whatever else he may do in the Parliamentary or political field in the future, he will not have the opportunity—at least, not as Financial Secretary—of pleasing the Committee as I am sure he would do if he were able to concede


at least one, or possibly two, of these proposed new Clauses.
I have done my best in very difficult circumstances, and I hope that it has made some impression on the Financial Secretary, although I very much doubt it But I hope that hon. Members opposite who have stayed to listen will one day use their influence in the 1922 Committee on behalf of these new Clauses and others which we are trying to get the Chancellor to accept.

Mr. William Clark: It is always a pleasure to follow the hon. Member for Sowerby (Mr. Houghton), and I think he is to be congratulated on making the same speech for thirteen consecutive years. I only wish that after having made the same speech for thirteen years I could put it across with the same fervour as he has done.
I was rather disappointed to learn that the hon. Gentleman does not look favourably on the proposed Clause standing in my name—(Children)—and that he spoke about administrative difficulties. I should have thought that with his great experience of Revenue matters, the hon. Gentleman would have found it easy administratively to put all these personal allowances on a graduated scale, being a percentage of gross income of taxpayers. That is done through P.A.Y.E. machinery covering the working population of the country so far as earned income relief is conerned.

Mr. Houghton: I am sorry to intervene, but the hon. Gentleman will realise that gross income is not known until the end of the tax year. Yet allowances for children have to be given in the coding during the year. This would lead to many end-of-year adjustments of child relief. Indeed, that is the reason why in 1957 the then Chancellor adopted the present graduated method and not the one recommended by the Royal Commission.

Mr. Clark: I accept that, but nevertheless income relief is not known in its entirety until the end of the year, until the income of the individual is known.
There is one inherent difficulty in our tax system. It so happens that this year I put down a proposed Clause dealing with child allowances, but what I am

about to say relates to the wife's allowance and other allowances. It seems wrong that we should have a graduated taxation system—earned income relief is graduated—yet the allowances that are given are on a kind of poll-tax basis. For example, there is £100 for a wife irrespective of one's income. There is £100 for a child under 11 irrespective of one's income. Whilst I do not expect the Financial Secretary to make any adjustment of the child allowance this year, in future years the whole range of our allowances should be reconsidered.
5.30 p.m.
If we take the average income throughout the country as £750-odd a year, the child allowance at £100 is roughly 12½ per cent. I should have thought it was logical, if a taxpayer earning £800 a year can keep a child for £100, to consider what happens to a taxpayer who is earning £1,600 a year. Is it logical to say that it costs him only £100 a year to keep that same child?
I wish to put this matter forward this year so that in future years we may look at the whole range of allowances, child allowance, dependant allowance, and so on. It may be that my hon. Friend the Financial Secretary will say, "Quite obviously this year we cannot afford it; next year it will be very difficult," that no doubt the Royal Commission said something about it but that he does not think the idea a good one at all.
I think it is quite true to say that the higher a person's income the more it costs him to keep a child. This works through the whole range of allowances. I cannot see why the Revenue cannot give a graduated allowance for these various things. It may be that as far as children are concerned it should be restricted. I have put in a maximum of £180 in my proposed new Clause. That figure may be wrong and the 12½ per cent. may be wrong.

Mr. Mitchison: Mr. Mitchison rose—

Mr. Clark: If the hon. and learned Gentleman will allow me to finish what I am saying, I will gladly give way to him.
As far as children are concerned, if the Revenue wishes to restrict the allowance, that would be understandable. Take


the cost of education of children. I believe I am right in saying that the education of a child throughout the country, from primary to secondary school, costs the State, on average, something of the order of £80 a year. It may be that the Revenue could consider whether, for example, an allowance should be given to the parent who does not take advantage of the State scheme of education. After all, he is paying rates and taxes and he is, in fact, saving the taxpayer money.

Mr. Mitchison: I am much obliged to the hon. Gentleman for giving way. I wonder whether, in considering the advantages of a graduated system, he has thought of having the graduation the other way round, so that the person who has the least income gets the highest allowance?

Mr. Clark: That is a valid point, but I think that it is also perfectly valid to say that since the advent of a Conservative Government in this country many taxpayers on low incomes have been exempted from taxation altogether owing to the progressive reduction in taxation that has been made and the increased allowances that have been given. Quite obviously—and I think that the hon. and learned Member realises this—we cannot give a fiscal relief to someone who does not pay tax.

Mr. Nabarro: As a matter of historical fact, the number of Income Tax payers at the moment is the highest in our history. The yield of Income Tax estimated at £2,700 million for 1961–62 is also the highest in our history. I think that these two facts rather militate against my hon. Friend's argument.

Mr. Clark: With great respect to my hon. Friend, that is only half the story. I am sure that my hon. Friend the Financial Secretary will be able to give us the figures. If we take a man who was earning £9 a week in 1951 and look at the tax that he was paying at that time, and then see what that £9 a week man is earning today, it will be clearly seen that under a Conservative Administration less direct taxation is being paid. It may be that, because of the increase in incomes generally since 1951, more people have come into the tax bracket, but, with great respect to my hon. Friend, I suggest

that that does not necessarily militate agains my argument. Progressively since 1951 we have not only reduced taxation but have increased personal allowances.

Mr. Harold Wilson: The hon. Member for Kidderminster (Mr. Nabarro) made the first of the two points which I would have put to the hon. Gentleman. There are now more people paying Income Tax than there were in 1951, but, surely, the hon. Gentleman realises—and if he does not he had better look up the debate on Second Reading—that, of course, the man who was earning £9 in 1951 would, if he were still getting £9 today, be doing very badly indeed. The cost of living has risen so much in the interval that, even allowing for any increase in real wages, he must have had a very big increase in wages in order to keep pace and this must carry him into a high rate of taxation. Before the hon. Gentleman wastes the time of the Committee with this fantastic argument he should have a look at the figures given during the Second Reading debate when I took the case, I think, of the £12-a-week man, the man about whom the Prime Minister had been talking, and showed, on the cost of living and with the tax remissions, that he would be paying now only a very small amount less in tax than he was paying in 1951. One has to add to that the whole of the poll tax, which utterly destroys the hon. Gentleman's argument.

Mr. Clark: I was present throughout the whole of the right hon. Gentleman's speech on Second Reading, to which I listened with great interest. I regret that he thinks that I am wasting the time of the Committee, but, nevertheless, I still maintain that the Conservative Government have reduced taxation. I accept, of course, that incomes have gone up generally and that more people are paying Income Tax, but we cannot get away from the fact—and here I do not apologise at all if any hon. Member thinks that I am wasting the time of the Committee—that the standard of living of the taxpayer is very much higher today than it was in 1951. That is the crux of the argument.
I will, if I may, get back to my original argument which is, apparently, looked upon with very much disfavour by hon. Members opposite. However, I trust


that my hon. Friend the Financial Secretary will look upon it more favourably. I wish to reiterate that these allowances should be more graduated. It costs more to keep a child if one's income is higher. Even if, probably, my hon. Friend cannot do anything this year, I hope he will be able to say that the Revenue will look at the matter very seriously not only in the context of child allowances but in the context of allowances generally, the wife's allowance, the dependant's allowance and so on, so that in future years we may get a more equitable allocation of relief for these people.

Dr. Horace King: I will not follow the hon. Member for Nottingham, South (Mr. W. Clark) in all that he has said in the debate, although I hope that my hon. and right hon. Friends on the Opposition Front Bench will take up some of his arguments. May I pick up two of the points he made? First, he paid rather grudging tribute to my hon. Friend the Member for Sowerby (Mr. Houghton) for having made the same kind of speech for some thirteen years. That, at least, is a tribute to my hon. Friend's consistency. We on these benches would also like to pay tribute to my hon. Friend's ability and sincerity, and if he has had to make the same pleas for thirteen years then the fault does not lie with him but with the Treasury Bench. The things for which he asks are, I believe, right and good things.
I hope that the Treasury will take no notice of the plea of the hon. Member for Nottingham, South that allowances should be on a graduated basis. The whole case against the poll tax is that it falls most heavily on those who can least afford to pay it. The reverse is true of allowances. The flat-rate allowances benefit most those who need them most. To increase allowances which are paid to people according to their income would mean that the increase would be given to people who did not need it. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) was right when he said that if there was to be any graduation it should be a graduation in reverse. The greatest allowance should be given to those with the least income.
I do not wish to enter into the general debate. I want to make a very human appeal to the Chancellor in support of the proposed new Clause—(Incapacitated child over the age of sixteen years). This is the new Clause which would treat the incapacitated child for Income Tax relief purposes as the Treasury already treats the university child.
This is the stage in the passage of the Finance Bill when the Chancellor can forget for a moment that he is Chancellor and show in this Committee some of the qualities of warm-heartedness and kindness which we know that he possesses as a human being outside. The proposals we make in this series of new Clauses do not affect the grand strategy of his Budget and the Finance Bill, much as we disapprove of the whole conception of the Finance Bill. As my hon. Friend the Member for Sowerby said, the Chancellor could give us all we ask for—particularly, what I am asking for now—at very little cost indeed.
Some of us have been pressing now, for nearly seven years, for relief of the kind which would be provided for by the new Clause relating to incapacitated children. I have turned up the records and I find that in 1954, 1956, 1957 and 1958, we pressed the claims of the parent who bears the crass of having to care for a child who is totally incapacitated, mentally or physically.
We have achieved something in the long struggle. The Minister of Pensions and National Insurance has done some good in this matter, as he has done in so many others. There used to be a gap in the family allowance for the incapacitated child between the ages of 15 and 16, when the child moved on to another system altogether. The Minister of Pensions has closed that gap. We want to close the Treasury gap between the incapacitated child and the able child at university and give to the parent who has to look after the incapacitated child over the age of 16, the child who has to be constantly cared for, the Income Tax relief which a parent receives for a child who does not need to be constantly cared for but who goes to university.
I pay what is almost an annual tribute to the mothers and fathers of Britain who care for spastic children, for epileptic children, for mentally defective


children and for totally crippled children. I am delighted to know that they are now banding together in associations where they can share their problems, give each other advice and help and make joint representations at both local and national level. They have, at any rate, removed some of the shame which they had in their minds because they felt that having an incapacitated child was some sort of reflection on them. That is not true at all, of course. Their devotion is beyond description and beyond praise. I imagine that every hon. Member has friends who take care of children who will go through life utterly unable to fend for themselves.
If incapacitated children receive education in special schools, they qualify for Income Tax relief, but not all of them can go to special schools. We have not enough special schools in the country for any except the totally blind and the totally deaf. We are only beginning to understand the nature of spasticity and the folly of equating it with mental deficiency. We used to think that, because a child could not get a message from the brain to the muscles because there was a blockage along the way, there was no brain there. We are beginning to discover that many a spastic child, if only he could break down the barrier which exists between the brain and muscular activity, would show that he had a brain which could be educated. We have achieved a good deal during the last few years in learning how to educate children who used to be regarded, even as late as ten or fifteen years ago, as totally ineducable.
Some parents insist on keeping their incapacitated children at home. They are a little afraid of the special school. They are very much afraid of the occupation centre where we congregate children who cannot profit even by special school education. When parents do overcome that barrier of reserve and send their children to the special schools and occupation centres, many of their fears prove to be utterly unfounded. But, still, many do not send their children there. Moreover, the special schools and other schools which we have for incapacitated children usually do not take children after they reach 16 years of age.
We still have not begun to tackle the problem of caring as a State for the incapacitated

child beyond the age of 16. We accept responsibility for him in the special school up to the age of 16, but we then neglect him and make no provision for him, ignoring the fact that he will be a special adult all his life and will need some kind of sheltered occupation or special provision.
If a lad goes to university or college or undergoes professional training, the parent has the allowance we are discussing, the £150 to which the hon. Member for Kidderminster (Mr. Nabarro) referred earlier in the debate. On the other hand, if a man's son is utterly unable to work, utterly unable to earn a penny, utterly unable to profit by any kind of education after the age of 16 even if it be there, there is no such allowance. I am thinking of the child who is, for instance, deaf, blind and dumb, the child who is deaf and spastic or the child who is blind and spastic. Those of us who love children find it difficult not to be emotional about the cases of which we know in our own experience. I think, also, of those who suffer from grave epilepsy such as the man I knew who, at the age of 25, was still being conducted wherever he went by a loyal and devoted parent because his epilepsy was so grave that it might come on at any moment. I say "grave epilepsy" because wonderful things are being achieved now for epileptics. If a child is in one of the categories to which I refer, if he is utterly dependent upon his parents, the Income Tax relief which his parents receive is relief for a dependent relative, which is about half the amount which a parent receives for a child at university.
5.45 p.m.
If anyone should have the tax relief provided for under the principal Act for children over the age of 16, the first people in queue ought to be those for whom I am pleading now.

Mr. Nabarro: Without prejudice to National Assistance relief in addition?

Dr. King: Certainly, without prejudice to National Assistance. Such children cost more in every possible way than normal children. Often, they have to be fed and clothed—literally fed and clothed—all their lives. The university lad, when he finishes his university career, may repay some of the financial


burden which his parents have borne on his behalf, but children in the group of which I am now speaking can never repay except in the affection and sublime trust which they pour back on the parents who sacrifice so much for them. It seems almost as if the incapacitated child knows intuitively the affection which his parents lavish on him.
We hear a great deal about the need for good mothers, good parents and good homes. I have often said that, if the mothers of normal children would accept their responsibilities as do the parents of incapacitated children, ours would indeed be a much finer Britain. The mother and father who have the good fortune to have a normal child born to them ought to get down on their knees and thank God for the opportunity of doing all they can as parents. The parents of incapacitated children could quite easily be bitter at the misfortune which has come to them, but they shoulder their responsibility with a magnificence which is beyond description.
I hope that the Minister will at least accept the new Clause providing for relief in respect of incapacitated children over the age of 16, even if he accepts no other of the human Clauses which we propose. If he does, he will be paying tribute, at little cost to his Department, to some of the nations greatest citizens—the parents of incapacitated children.
I realise that the Treasury is not likely to be moved by human arguments alone and, therefore, I put this economic argument: if a parent of the sort of child I have described abdicates his responsibility, we have to accept that as a State. And if the State accepts that responsibility, then the cost is enormous—anything from £8 to £12 a week, putting it at its lowest. The State should, therefore, be happy to recognise that the devotion of these parents saves the State a lot of money, and the Economic Secretary should now say that he will, at last—after about seven years—be more than willing to accept the new Clause which would treat the parents of incapacitated children as it treats the parents of university children.

The Financial Secretary to the Treasury (Sir Edward Boyle): The hon. Member for Sowerby (Mr. Houghton) when moving these new Clauses, sounded a

little depressed about the result of his work of the past thirteen years. But I urge him, if ever he feels in a mood of depression about his career, to read the biography of Joseph Cooper who gained fame with a picture of sheep in snow at the age of 25 and who then went on painting pictures of sheep and cattle in the Cumbrian Hills, generally in snow, for the next seventy-five years until he died in 1901. His career would seem a remarkable example of pertinacity.
I am sure that the whole Committee is also glad to have had the hon. Member for Kidderminster (Mr. Nabarro) in such good voice this afternoon. He is no doubt limbering up for another new Clause about which he hopes to catch your eye, Sir William.
Regarding the new Clause—(increase of relief in respect of children not over the age of eleven)—which proposes an increase of £10 in the lowest tier of the child allowance, that is to say, for children not yet over 11 years of age, it is worth remembering, first of all, that the present Government have increased the amount of the child allowance no less than three times during their period of office. There were all-round increases from £70 to £85 in 1952 and to £100 in 1955. In 1957 the allowance for older children was again raised. This time it was made a differential allowance and raised to £125 for children over 11 and to £150 for children over 16 who were receiving full-time education at school or university, or who were undergoing full time training as apprentices for at least a two-year period. In 1957, of course, the child allowance was made allowable for Surtax as well as Income Tax.
As I said when winding up the debate on Second Reading, I think that this increased differential child allowance has proved a timely concession for the family man, at a time when more and more children are staying on at secondary schools beyond the statutory school-leaving age. But we must recognise that the further improvement at the bottom tier, of the £100 allowance, suggested this evening by hon. Gentlemen opposite, would cost as much as £15 million in a full year.
My right hon. and learned Friend the Chancellor cannot accept this proposal on the grounds of cost. I do not want


to go at length into the general arguments, because the Committee is well aware that my right hon. and learned Friend regards his prospective revenue surplus of £500 million as fundamental to his Budget strategy this year and has come to the conclusion that he cannot this year afford any significant reduction of direct taxation. But I can assure hon. Members that when a further general relaxation of taxation becomes possible, the whole field will be reviewed and the claims of the main personal allowances—for married and single persons—and the claims of the child allowance will be taken into account, along with all the other claims.
My hon. Friend the Member for Kidderminster raised the question of the relative improvement in the child allowance and wife's allowance. My hon. Friend appears to be out of the Chamber at present, but I can claim to be relatively neutral on this point. I thought, at one moment, that my hon. Friend seemed to be getting close to saying that wives cost more as they grow older. I can assure my hon. Friend that my right hon. and learned Friend the Chancellor will, of course, consider the claims of all the allowances in future years, as and when a reduction of general taxation becomes possible.

Mr. Nabarro: I regret that I was absent for a moment. I am appealing to the Chancellor, in the next twelve months, to review all these allowances for Income Tax purposes in order to rationalise them. Does not the Financial Secretary realise that we have got to the position, as a result of the brilliant exposition of the hon. Member for Sowerby (Mr. Houghton), where a child up to 11 has an allowance of £100, a child between 12 and 15 has an allowance of £125, a child over 16—in full-time education—has £150, and where there is an allowance of £75 for a dependent relative, £75 for a housekeeper and £40 for the services of a daughter? Against that, there is only a £100 allowance in respect of the "missus". Surely these allowances have got entirely out of balance with one another and should be rationalised.

Sir E. Boyle: If my hon. Friend will read what I was saying in tomorrow's OFFICIAL REPORT he will see that I gave an assurance that my right hon. and

learned Friend will look at the whole field of personal allowances in the future.
In the case of the new Clause in the name of the hon. Member for Nottingham, South (Mr. W. Clark), the cost of the extra relief there proposed would be as much as £48 million in a full year, and it therefore rules out serious consideration of that proposal this year. There are also some serious objections, in principle, to the proposal that we should make the Income Tax child allowances vary within limits according to the size of the parental incomes.
It is true that my hon. Friend's proposal is in line with the second Report of the Royal Commission. But one should remember that since the publication of that Report we introduced in 1957 the three-tier system of child allowances and, as I have reminded the Committee, made these allowances allowable for Surtax as well as for Income Tax. Both these steps were taken to ease the position of the family man.
If we were to accept the principle of my hon. Friend's new Clause we should be suggesting that people with incomes over £800 deserve bigger tax allowances than people with lower incomes because they tend to spend more on their children. If that line of reasoning were accepted it seems obvious—quite apart from any moral considerations—that we could hardly stop there. There would, obviously, be demands that other personal allowances should also be put on a sliding scale—personal allowances to married men, for instance, in respect of wives—and the further the process spread the more costly to the Exchequer it would become.
The second new Clause, on which an impressive speech was made in support by the hon. Member for Southampton, Itchen (Dr. King), proposes that the child allowance of £150 should be given in place of the dependent relative's allowance if a taxpayer has an incapacitated child between the ages of 16 and 21. I replied to a similar Clause during our debates last year, and I fear that I must this evening repeat some of the arguments I used on that occasion.
We all agree—and there is no dispute here—that the incapacitated child, like any other, is its parent's responsibility until the age of 16. Fortunately, a great


deal more is done today by the community for incapacitated children. While I was at the Ministry of Education one of my special responsibilities, like my predecessor and my successor, was the work of the special schools, and I appreciate how much more is done today for children who are handicapped, blind, deaf, spastic or otherwise disabled.
6.0 p.m.
Once an incapacitated child reaches the age of 16, I can only repeat to the Committee the view of the Government that the child is more suitably helped through the system of social services than by way of tax reliefs. As the Committee is well aware, when the child of 16 or over is unable to work, the social services provide for maintenance grants through the National Assistance Board, irrespective of the means of the parents. These grants are kept in line with changes in the cost of living and, through them, an incapacitated child without income or capital of his own can obtain a basic income in his own right.
Furthermore, the fact that the incapacitated child was receiving a grant from the National Assistance Board would not affect the parent's right to claim the dependent relative allowance for the child and, since the grant from the National Assistance Board does not rank as income for tax purposes, a parent whose child had no income other than the grant could still claim the full dependent relative allowance of £75. I still hold to the view that I expressed last year, that direct provision of this kind is the best way of mitigating the hardship over the whole field, whether we are dealing with incapacitated children over 16 or incapacitated adults—and that is what is achieved by the provision of National Assistance.

Dr. King: As the hon. Gentleman says, he is using the argument that he used in a similar debate last year. He points out that the incapacitated child, when 16, is in receipt of something from the State. That is true, but so is the university student. There is hardly a university student today who is not receiving from the State, in the form of a university grant, at least three times what the incapacitated child gets from the State because of his incapacity. Why should not the parent of such a child receive the

Income Tax relief that the parent of the university student gets?

Sir E. Boyle: In answer to that, I can only repeat what I said before, that I think that the big decision we have to make in this case is whether the incapacitated child over 16 should be dealt with primarily as a child or in a way rather more analogous to the incapacitated adult. I recognise that the Committee is divided on this but, rightly or wrongly, we think that the best way—and I shall come to a further reason in a moment—to deal with the child of over school age is to deal with him, as it were, like anyone else who is incapacitated—that the best thing to do is to treat him through our system of social services.
There is another objection to the new Clause. There would be little justification in logic for giving an allowance of £150 for an incapacitated child between the ages of 16 and 21 while keeping the allowance for other dependent relatives at the level of a maximum of £75. Surely, if one type of dependent relative, the incapacitated child, ranks for £150, there would inevitably be a demand that bigger allowances should be given for all dependent relatives, whatever the degree of relationship.
In fairness to the hon. Member for Sowerby, who always thinks his proposals through very clearly, I know that he said last year that the Opposition would not try to generalise this concession. But, in my view, the demand for its extension would be bound to arise, and I wonder whether in logic, or even in equity, the case of the incapacitated child is really distinguishable from the rest. For instance, the cost of looking after an adult relative suffering from a serious illness may be just as heavy as, or even heavier than, the cost of looking after a seriously incapacitated child between the ages of 16 and 21. If we were to accept this present proposal, I believe that it would be difficult to resist claims for an all-round increase in dependent relative allowance, which would cost a good deal of money.
Indeed, I cannot see that the present differentiation between the incapacitated child and the student or apprentice is really unreasonable. The period of study or training in one of our many types of institutions for further education


is surely no more than an extension, for a few years, of the period in which a child could rightly look primarily to his parents for maintenance. I know that the National Union of Students, and the diehard supporters of the majority Report of the Anderson Committee, would disagree with me very strongly there, but I still believe it to be broadly true.
The case of the incapacitated child is, surely, a different one. I cannot see anything unreasonable about treating the incapacitated child from the age of 16 onwards in the same way as an incapacitated adult—

Dr. King: Surely the incapacitated child is having an extended childhood which lasts all its life. The Minister is arguing that the university student is having a kind of extended childhood in relation to parental responsibility. Our whole case is that the incapacitated child is still a child even at 21.

Sir E. Boyle: In a way, I could put the same point with equal fairness the other way round. The child who on leaving school goes on to an institution of further education is just postponing his earning capacity for a few years in a very desirable way, but it is obvious that when the incapacitated child leaves school he is seriously incapacitated and, from the point of view of getting on in the world, is in the same position then as he will be all his life. From that point of view, again, I should have thought it reasonable to treat that child from the age of 16 in the same way as an incapacitated adult.
It is extremely distasteful to have to talk about this subject in these terms, but when we come to decide whether we should have some special relief, or should deal with incapacitated children of over 16 through the medium of the social services, it is quite an important decision to take. Having considered it several times, I must confess that I believe that the Government are right in the view they take. I believe that if the Committee were to accept this new Clause we should be breaking up this continuity of treatment which would lead to the creation of a new anomaly between the treatment of one class of dependent relative and another which really would be hard to justify.
I come, finally, to the last of this group of new Clauses, which proposes to increase from £40 to £50 the daughter's services allowance. This, as the hon. Member for Sowerby said, is an allowance of £40 that can be claimed by a taxpayer who, because of his old age or infirmity, is compelled to call on the services of his daughter resident with or maintained by him.
This allowance, as the Committee is aware, was the subject of pretty severe criticism by the Royal Commission in its 1954 Report. It held that the allowance for daughter's services depends on the combination of such special circumstances that it cannot really be justified; and suggested in its Report that the allowance should disappear, or else that the scheme for Income Tax allowances to taxpayers who are incapacitated ought to be so much extended that this special allowance would not be necessary.
The suggestion that there should be a special disablement allowance has been discussed frequently in Finance Bill debates in recent years. We debated it in 1959, and, again, I replied to a similar debate last year; and I notice that the Opposition have put down new Clauses on the same point this year which are not selected. Rightly or wrongly, for the same reasons that we have argued in the past, the Government have never felt able to accept that proposal. The Government think that the right way to deal with the problem of disability is through our nation-wide system of social services rather than through some special form of tax reliefs. So even at its present level, the daughter's services allowance is something of an anomaly in our present tax system. It is the only allowance dependent on the disability of the taxpayer and, as the Royal Commission fairly pointed out, it is capricious, in that it depends on the taxpayer having a daughter available to look after him.
Successive Chancellors have never been able to accept the suggestion that the allowance should be withdrawn altogether, but, equally, they have held the view—and my right hon. and learned Friend still holds it—that we should not increase an allowance which is something of an anomaly in our present tax system and which has been so criticised by the Royal Commission. It was for this


reason last year that the present Lord Amory increased the housekeeper and dependent relative allowances from £60 to £75, but he left the daughter's services allowance at £40. My right hon. and learned Friend feels that this was a practical compromise solution, not, perhaps, quite right in strict logic but a reasonable compromise solution. The same reasons which influenced Lord Amory have decided my right hon. and learned Friend against making any increase in this allowance this year.
I have, I fear, spoken to the Committee at some length, because these are all important points which we have been considering, but for all these reasons, while the Government are firm in the belief that they have nothing whatsoever to be ashamed of in their record of increased tax allowances since 1951—and I would say to my hon. Friend the Member for Nottingham, South that if he takes the advice of the right hon. Member for Huyton (Mr. H. Wilson) and looks up the figures whch he quoted on Second Reading he may also care to look up some of my figures as well, which I gave later on in that debate—they cannot advise the Committee to accept any of the new Clauses.

Mr. Mitchison: Treasury logic is, in many ways, remarkable. I sometimes disagree with the premises. I rarely disagree with the dealings after the premises have been stated, except on one point: it always seems to work out the same way. Whatever the anomalies are, less but not more concessions are to be made, and whatever concessions are to be made, it is only logical that they should be as small as possible. I cannot think that that is quite the right way of looking at this kind of problem.
I will not develop what my hon. Friend the Member for Sowerby (Mr. Houghton) said about the child allowance, but I suspect that there must be something a little wrong when someone with experience and understanding in this field has to press for so long so many different Chancellors of the Exchequer in the same sense.
Turning from that, I come to the incapacitated child. There seemed to me to be a little confusion here. What we are considering is an Income Tax

concession to the parent of the incapacitated child. I do not regard that as quite the same thing as help which is given to the child, whether in a money form or in any other form. As my hon. Friend the Member for Southampton, Itchen (Dr. King) pointed out in a speech which I personally found most moving, it takes a very great deal of the love and attention of the parent to attend a child like this.
We have all of us known in our constituencies the most heart-rending cases of this sort of trouble, and I simply feel that, when it comes to taxation logically, even in Treasury logic, there is a case for recognising the actual use of time in that way, and that this is a type of matter in which, perhaps, it is not altogether wrong to let the heart run away far a little, and to consider what these parents are having to do—something which, as we all know, no one but a parent can do, something which takes part of the parents' life and much of their development as people, something given, in the fullest sense of the word. I do not think that we can quite rule that out even in the extremes of fiscal logic.
I should like to make a suggestion. I have not the expert knowledge of my hon. Friend, nor, of course, the expert knowledge which is available to and is held by many Treasury Ministers, but when I listen to these debates, especially on this sort of allowance, I do not think that there are cases in which the Treasury ought to avail itself of some form of independent advice. The National Insurance Advisory Committee is doing some very useful service. I am not suggesting that a body of that sort could in any way take the place of the Chancellor of the day. It is for him, of course, to make the final fiscal decision, but when it is a question of removing anomalies, when there are questions of the incidence of taxation as compared with questions of social benefits and social help in one form or another, when all that arises, it does seem to me to be the kind of thing which could usefully be considered by a standing commission.
6.15 p.m.
I suppose I must say that I am speaking for myself. So I am, but I have made a few inquiries, and I do not think my right hon. and hon. Friends would object. The Royal Commission


did most valuable work. We may agree or disagree with this or that recommendation; we may find that there has been a development one way or another; but it was a Royal Commission within a very wide field indeed, and it naturally and properly took time. A standing committee or commission would have a much smaller field, but I should have thought that within that field it might be able to render useful advice to the Chancellor of the day within the limits I have been trying to indicate, and do so more or less regularly. It is a question for consideration whether it ought to have the power to tender advice on its own, or whether, as, no doubt, would anyhow normally be the case, it should answer questions put to it as the National Insurance Committee does.
Turning from that comparatively peaceful suggestion to the ardours of Parliamentary warfare, we do not propose to divide on the first of these Clauses, not because we do not feel strongly about it, but out of regard for the time of the Committee, and because, as my hon. Friend indicated, we have expressed our opinions on this matter so many times before. They have not

changed in the least, but we think it is sufficient to say that, and, having said it, to divide on the Second Clause; and I do not think I can do better than to sum up our views about it by saying, for the reasons indicated by my hon. Friend the Member for Southampton, Itchen.

Question, That the Clause be read a Second time, put and negatived.

New Clause.—(INCAPACITATED CHILD OVER THE AGE OF SIXTEEN YEARS.)

In subsection (1) of section two hundred and twelve of the Income Tax Act, 1952 (which relates to relief for children), after the words "if over the age of sixteen years at the commencement of that year, is receiving full-time instruction at any university, college, school or other educational establishment", there shall be inserted the words "or who, being over the age of sixteen years, but has not attained the age of twenty-one years at the commencement of that year is incapacitated by illness, infirmity or disablement from undergoing full-time instruction at any school or other educational establishment or from following any gainful occupation".—[Mr. Mitchison.]

Brought up, and read the First time.

Motion made, and Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 184, Noes 259.

Division No. 210.]
AYES
[6.18 p.m.


Ainsley, William
Foot, Michael (Ebbw Vale)
Jones, Rt. Hn. A. Creech (Wakefield)


Allaun, Frank (Salford, E.)
Fraser, Thomas (Hamilton)
Jones, Dan (Burnley)


Allen, Scholefield (Crewe)
Gaitskell, Rt. Hon. Hugh
Jones, J. Idwal (Wrexham)


Bacon, Miss Alice
Ginsburg, David
Jones, T. W. (Merioneth)


Baxter, William (Stirlingshire, W.)
Gordon Walker, Rt. Hon. P. C.
Kelley, Richard


Bence, Cyril
Gourlay, Harry
Key, Rt. Hon. C. W.


Benson, Sir George
Greenwood, Anthony
King, Dr. Horace


Blyton, William
Grey, Charles
Lawson, George


Boardman, H.
Griffiths, David (Rother Valley)
Ledger, Ron


Bowden, Herbert W. (Leics, S.W.)
Griffiths, Rt. Hon. James (Llanelly)
Lee, Frederick (Newton)


Boyden, James
Grimond, J.
Lever, L. M. (Ardwick)


Braddock, Mrs. E. M.
Hale, Leslie (Oldham, W.)
Lewis, Arthur (West Ham, N.)


Brockway, A. Fenner
Hall, Rt. Hn. Glenvil (Colne Valley)
Lipton, Marcus


Brown, Rt. Hon. George (Belper)
Hamilton, William (West Fife)
Logan, David


Butler, Herbert (Hackney, C.)
Hannan, William
Mabon, Dr. J. Dickson


Butler, Mrs. Joyce (Wood Green)
Hart, Mrs. Judith
McCann, John


Callaghan, James
Hayman, F. H.
MacColl, James


Castle, Mrs. Barbara
Healey, Denis
McInnes, James


Chapman, Donald
Henderson, Rt. Hn. Arthur (Rwly Regis)
McKay, John (Wallsend)


Chetwynd, George
Herbison, Miss Margaret
Mackie, John (Enfield, East)


Craddock, George (Bradford, S.)
Hewitson, Capt. M.
McLeavy, Frank


Crosland, Anthony
Hill, J. (Midlothian)
Manuel, A. C.


Cullen, Mrs. Alice
Hilton, A. V.
Mapp, Charles


Darling, George
Holman, Percy
Marquand, Rt. Hon. H. A.


Deer, George
Holt, Arthur
Marsh, Richard


de Freitas, Geoffrey
Houghton, Douglas
Mason, Roy


Diamond, John
Howell, Charles A. (Perry Barr)
Mayhew, Christopher


Dodds, Norman
Hoy, James H.
Mellish, R. J.


Donnelly, Desmond
Hughes, Emrys (S. Ayrshire)
Millan, Bruce


Driberg, Tom
Hughes, Hector (Aberdeen, N.)
Milne, Edward J.


Dugdale, Rt. Hon. John
Hunter, A. E.
Mitchison, G. R.


Ede, Rt. Hon. C.
Hynd, H. (Accrington)
Monslow, Walter


Edelman, Maurice
Irvine, A. J. (Edge Hill)
Moody, A. S.


Edwards, Robert (Bilston)
Irving, Sydney (Dartford)
Mort, D. L.


Edwards, Walter (Stepney)
Janner, Sir Barnett
Moyle, Arthur


Evans, Albert
Jay, Rt. Hon. Douglas
Mulley, Frederick


Fernyhough, E.
Jeger, George
Neal, Harold


Fitch, Alan
Jenkins, Roy (Stechford)
Noel-Baker, Francis (Swindon)


Fletcher, Eric
Johnson, Carol (Lewisham, S.)
Noel-Baker, Rt. Hn. Philip (Derby, S.)




Oliver, G. H.
Ross, William
Taylor, John (West Lothian)


Oram, A. E.
Short, Edward
Thompson, Dr. Alan (Dunfermline)


Owen, Will
Silverman, Julius (Aston)
Thomson, G. M. (Dundee, E.)


Paget, R. T.
Silverman, Sydney (Nelson)
Thornton, Ernest


Pannell, Charles (Leeds, W.)
Skeffington, Arthur
Timmons, John


Parker, John
Slater, Mrs. Harriet (Stoke, N.)
Tomney, Frank


Parkin, B. T.
Slater, Joseph (Sedgefield)
Ungoed-Thomas, Sir Lynn


Pavitt, Laurence
Small, William
Wade, Donald


Pearson, Arthur (Pontypridd)
Smith, Ellis (Stoke, S.)
Wainwright, Edwin


Peart, Frederick
Sorensen, R. W.
Warbey, William


Pentland, Norman
Soskice, Rt. Hon. Sir Frank
Walls, Percy (Faversham)


Popplewell, Ernest
Spriggs, Leslie
Whitlock, William


Prentice, R. E.
Steele, Thomas
Wilcock, Group Capt. C. A. B.


Price, J. T. (Westhoughton)
Stewart, Michael (Fulham)
Wilkins, W. A.


Probert, Arthur
Stonehouse, John
Willey, Frederick


Proctor, W. T.
Stones, William
Willis, E. G. (Edinburgh, E.)


Pursey, Cmdr. Harry
Strachey, Rt. Hon. John
Wilson, Rt. Hon. Harold (Huyton)


Reid, William
Strauss, Rt. Hn. G. R. (Vauxhall)
Winterbottom, R. E.


Roberts, Albert (Normanton)
Stross, Dr. Barnett (Stoke-on-Trent, C.)
Woodburn, Rt. Hon. A.


Roberts, Goronwy (Caernarvon)
Swingler, Stephen
Woof, Robert


Robertson, John (Paisley)
Sylvester, George
Yates, Victor (Ladywood)


Robinson, Kenneth (St. Pancras, N.)
Symonds, J. B.



Rogers, G. H. R. (Kensington, N.)
Taylor, Bernard (Mansfield)
TELLERS FOR THE AYES:




Dr. Broughton and Mr. Redhead.




NOES


Agnew, Sir Peter
Digby, Simon Wingfield
Iremonger, T. L.


Aitken, W. T.
Donaldson, Cmdr. C. E. M.
Irvine, Bryant Godman (Rye)


Allan, Robert (Paddington, S.)
du Cann, Edward
Jackson, John


Arbuthnot, John
Duncan, Sir James
James, David


Atkins, Humphrey
Duthie, Sir William
Jenkins, Robert (Dulwich)


Balniel, Lord
Eccles. Rt. Hon. Sir David
Johnson, Eric (Blackley)


Barber, Anthony
Eden, John
Johnson Smith, Geoffrey


Barter, John
Elliot, Capt. Walter (Carshalton)
Jones, Rt. Hn. Aubrey (Hall Green)


Batsford, Brian
Elliott, R.W. (Nwcstle-upon-Tyne, N.)
Kaberry, Sir Donald


Baxter, Sir Beverley (Southgate)
Emery, Peter
Kerby, Capt. Henry


Beamish, Col. Sir Tufton
Emmet, Hon. Mrs. Evelyn
Kirk, Peter


Bed, Ronald
Errington, Sir Eric
Kitson, Timothy


Bennett, F. M. (Torquay)
Farey-Jones, F. W.
Lagden, Godfrey


Bennett, Dr. Reginald (Gos &amp; Fhm)
Finlay, Graeme
Lambton, Viscount


Bidgood, John C.
Fisher, Nigel
Langford-Holt, J.


Biggs-Davison, John
Fraser, Ian (Plymouth, Sutton)
Leather, E. H. C.


Birch, Rt. Hon. Nigel
Freeth, Denzil
Leavey, J. A.


Bishop, F. P.
Gammans, Lady
Legge-Bourke, Sir Harry


Black, Sir Cyril
Gardner, Edward
Lewis, Kenneth (Rutland)


Bossom, Clive
Glover, Sir Douglas
Lindsay, Martin


Bourne-Arton, A.
Glyn, Dr. Alan (Clapham)
Linstead, Sir Hugh


Boyle, Sir Edward
Goodhart, Philip
Litchfield, Capt. John


Braine, Bernard
Goodhew, Victor
Lloyd, Rt. Hon. Selwyn (Wirral)


Brewis, John
Gough, Frederick
Longden, Gilbert


Brooman-White, R.
Grant, Rt. Hon. William
Loveys, Walter H.


Browne, Percy (Torrington)
Grant-Ferris, Wg. Cdr. R.
Lucas, Sir Jocelyn


Bryan, Paul
Green, Alan
Lucas-Tooth, Sir Hugh


Buck, Antony
Grimston, Sir Robert
McAdden, Stephen


Burden, F. A.
Grosvenor, Lt.-Col. R. G.
MacArthur, Ian


Butcher, Sir Herbert
Gurden, Harold
McLaren, Martin


Campbell, Sir David (Belfast, S.)
Hall, John (Wycombe)
McLaughlin, Mrs. Patricia


Campbell, Gordon (Moray &amp; Nairn)
Hamilton, Michael (Wellingborough)
Maclay, Rt. Hon. John


Carr, Compton (Barons Court)
Harris, Frederic (Croydon, N.W.)
Maclean, Sir Fitzroy (Bute &amp; N. Ayrs.)


Carr, Robert (Mitcham)
Harris, Reader (Heston)
MacLeod, John (Ross &amp; Cromarty)


Cary, Sir Robert
Harrison, Col. Sir Harwood (Eye)
McMaster, Stanley R.


Channon, H. P. G.
Harvey, Sir Arthur Vere (Macclesf'd)
Macmillan, Maurice (Halifax)


Chichester-Clarke, R.
Harvey, John (Walthamstow, E.)
Macpherson, Niall (Dumfries)


Clark, Henry (Antrim, N.)
Harvie Anderson, Miss
Maddan, Martin


Clark, William (Nottingham, S.)
Hastings, Stephen
Maginnis, John E.


Clarke, Brig. Terence (Portsmth, W.)
Hay, John
Markham, Major Sir Frank


Cleaver, Leonard
Heald, Rt. Hon. Sir Lionel
Marlowe, Anthony


Cole, Norman
Henderson, John (Cathcart)
Marshall, Douglas


Cooke, Robert
Henderson-Stewart, Sir James
Marten, Neil


Cooper-Key, Sir Neill
Hendry, Forbes
Matthews, Gordon (Meriden)


Cordeaux, Lt.-Col. J. K.
Hiley, Joseph
Mawby, Ray


Corfield, F. V.
Hill, Mrs. Eveline (Wythenshawe)
Maxwell-Hyslop, R. J.


Costain, A P.
Hinchingbrooke, Viscount
Mills, Stratton


Coulson, J. M.
Hirst, Geoffrey
Montgomery, Fergus


Craddock, Sir Beresford
Holland, Philip
More, Jasper (Ludlow)


Critchley, Julian
Hollingworth, John
Morrison, John


Crosthwaite-Eyre, Col. Sir Oliver
Hopkins, Alan
Nabarro, Gerald


Cunningham, Knox
Hornby, R. P.
Nicholson, Sir Godfrey


Curran, Charles
Hornsby-Smith, Rt. Hon. Patricia
Noble, Michael


Currie, G. B. H.
Howard, Hon. G. R. (St. Ives)
Nugent, Sir Richard


Dalkeith, Earl of
Howard, John (Southampton, Test)
Oakshott, Sir Hendrie


Dance, James
Hughes Hallett, Vice-Admiral John
Orr, Capt. L. P. S.


d'Avigdor-Goldsmid, Sir Henry
Hughes-Young, Michael
Orr-Ewing, C. Ian


Deedes, W. F.
Hulbert, Sir Norman
Osborn, John (Hallam)


de Ferranti, Basil
Hurd, Sir Anthony
Osborne, Sir Cyril (Louth)







Page, John (Harrow, West)
Seymour, Leslie
Turton, Rt. Hon. R. H.


Page, Graham (Crosby)
Sharples, Richard
van Straubenzee, W. R.


Pannell, Norman (Kirkdale)
Shaw, M.
Vaughan-Morgan, Rt. Hon. Sir John


Partridge, E.
Skeet, T. H. H.
Vickers, Miss Joan


Pearson, Frank (Clitheroe)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)
Vosper, Rt. Hon. Dennis


Peel, John
Smithers, Peter
Wakefield, Edward (Derbyshire, W.)


Percival, Ian
Spearman, Sir Alexander
Walder, David


Peyton, John
Speir, Rupert
Walker, Peter


Pickthorn, Sir Kenneth
Stanley, Hon. Richard
Walker-Smith, Rt, Hon. Sir Derek


Pilkington, Sir Richard
Stevens, Geoffrey
Wall, Patrick


Pitt, Miss Edith
Steward, Harold (Stockport, S.)
Ward, Dame Irene


Pott, Percivall
Stodart, J. A.
Watkinson, Rt. Hon. Harold


Powell, Rt. Hon. J. Enoch
Stoddart-Scott, Col. Sir Malcolm
Webster, David


Price, David (Eastleigh)
Studholme, Sir Henry
Whitelaw, William


Prior-Palmer, Brig. Sir Otho
Summers, Sir Spencer (Aylesbury)
Williams, Dudley (Exeter)


Profumo, Rt. Hon. John
Talbot, John E.
Williams, Paul (Sunderland, s.)


Proudfoot, Wilfred
Tapsell, Peter
Wills, Sir Gerald (Bridgwater)


Pym, Francis
Taylor, Sir Charles (Eastbourne)
Wilson, Geoffrey (Truro)


Quennell, Miss J. M.
Taylor, Edwin (Bolton, E.)
Wise, A. R.


Ramsden, James
Teeling, William
Woodhouse, C. M.


Rawlinson, Peter
Temple, John M.
Woodnutt, Mark


Redmayne, Rt. Hon. Martin
Thatcher, Mrs. Margaret
Woollam, John


Rees-Davies, W. R.
Thomas, Leslie (Canterbury)
Worsley, Marcus


Renton, David
Thompson, Kenneth (Walton)
Yates, William (The Wrekin)


Ridsdale, Julian
Thompson, Richard (Croydon, S.)



Robertson, Sir D. (C'thn's &amp; S'th'ld)
Thorneycroft, Rt. Hon. Peter
TELLERS FOR THE NOES:


Robinson, Sir Roland (Blackpool, S.)
Thornton-Kemsley, Sir Colin
Mr. Gibson-Watt and


Ropner, Col. Sir Leonard
Tiley, Arthur (Bradford, W.)
Mr. J. E. B. Hill.


Russell, Ronald
Turner, Colin

New Clause.—(EXTENSION OF RELIEF UNDER S. 9 OF FINANCE, ACT, 1956.)

(1) Subsections (1) and (2) of section nine of the Finance Act, 1956 (which provide relief from income tax on certain savings bank interest) shall, subject to the provisions of the next following subsection, apply in respect of dividends on shares of a society registered under the Industrial and Provident Societies Acts, 1893 to 1954, or under the Industrial and Provident Societies Acts (Northern Ireland), 1893 to 1955, and in respect of interest on deposits with such a society or with a registered friendly society, as they apply in respect of interest on deposits with the Post Office savings bank.

(2) Where by virtue of the last foregoing subsection the amount of surtax payable by an individual would exceed the sum of—

(a) the amount of surtax which would have been payable by him, if that subsection had not been passed, and
(b) the amount of relief, if any, to which he is entitled by virtue of that subsection

that excess shall be disregarded for all the purposes of the Income Tax Acts.—[Mr. Dodds.]

Brought up, and read the First time.

Mr. Norman Dodds: I beg to move, That the Clause be read a Second time.
In a year in which the Government have displayed amazing generosity towards those whom the Chancellor calls the hard-pressed Surtax payers it is hoped that the Clause will be acceptable to the Treasury as an act of equity and common justice to millions of those who in the economic sense are little people and that thus we shall end an injustice which we in the co-operative movement charge as having begun in 1956. We feel that in the special circumstances of this year we

have a right, and certainly a better right than the Surtax payers, to expect that the Clause will be accepted when in the Budget the Government have proposed huge Surtax reliefs and their excuse for so doing has been blown sky-high by my right hon. Friend the Member for Battersea, North (Mr. Jay).
When he proposed the reliefs in his Budget speech, the Chancellor told us that they were justified on the ground of creating an incentive by rewarding earned income. My right hon. Friend the Member for Battersea, North, however revealed on 7th June that a large part of the relief would go to unearned income and thereby clearly indicated how the Chancellor had intended to mislead the Committee. We feel, therefore, that against that background there is a very strong case this year for accepting the Clause, and particularly in a year during which the Treasury has increased the National Insurance contributions and Health Service charges. We feel that, before it is too late, the Government should have the chance to redeem themselves in the eyes of millions of people by accepting this Clause.
6.30 p.m.
By the extension of relief under Section 9 of the Finance Act, 1956, the first £15 of interest on savings in the Post Office Savings Bank and the ordinary departments of trustee savings banks is exempted from Income Tax. We of the co-operative movement do


not quarrel that that should have been done for the small savers. Our quarrel arises in that co-operative small savings were not included in that relief. We say that because the co-operative business is a unique type—we feel that the Treasury seems to forget this—particularly in respect of small savings, we think that the 1956 Act extension made a discrimination of some consequence. I can assure the Treasury Bench that we shall never stop protesting until that is swept away.
The purpose of the Clause is to extend the Income Tax concession given in 1956 to cover interest on shares invested with a society registered under the Industrial and Provident Societies Acts, and also the interest on deposits in penny bank accounts. If the Clause were accepted, it would mean that the first £15 of interest on such investments and deposits would be exempted from Income Tax, thus bringing them into line with the Post Office Savings Bank and the trustee savings banks.
We believe that the concession would be an incentive and would encourage genuine small savings the co-operative way. At this time, particularly in view of the mess the Government are getting the country into, this encouragement is vital, together with similar encouragements, to the well-being of the community as well as in removing an injustice imposed upon the people's movement by the 1956 extension.
It is possible that we shall be told by a Treasury Minister that an important reason for not giving the concession is that the Past Office and trustee savings banks have a fixed rate of interest at 2½ per cent. Although, in the co-operative movement, the interest rates are particularly modest, they vary from 2½ per cent. to 3½ per cent. If that is advanced as one of the main reasons for not accepting the Clause, we do not accept it, because we say that the co-operative type of savings should still get a concession even though there is the very small difference in interest rates between 2½ and 3½ per cent.
Since many co-operative societies pay only 2½ per cent., I would ask the Treasury Minister to say whether societies which agreed to a 2½ per cent. rate of interest would be included in the same way as the Post Office and trustee

savings banks. If the answer is "No", then it shows what nonsense was talked by the Economic Secretary last year when he used this argument to turn down a new Clause which was proposed by a Co-operative Member.
Last year, my hon. Friend the Member for Dartford (Mr. Sydney Irving) raised the question of the dangers of the transfer of small savings from the co-operative movement into the Post Office or trustee savings banks because of the £15 concession. It was rather remarkable that the Economic Secretary, who had the point put to him, completely ignored it when he replied. Later in his speech, my hon. Friend asked the Economic Secretary for an answer. I notice that the Economic Secretary is not paying much attention this afternoon. If he is, I congratulate him on being able to do two things at once. My hon. Friend asked whether the Economic Secretary was going to answer the question about the dangers of a transfer from the co-operative movement to the Post Office and trustee savings banks. In reply, the Economic Secretary said:
I made inquiries today about that point and I was told that there was no evidence that depositors or shareholders in co-operative societies had switched on a large scale."—[OFFICIAL REPORT, 22nd June, 1960; Vol. 625, c. 447.]
This was followed up at Question Time for several weeks. There is nothing that the Economic Secretary or anyone else on his behalf said, and nothing from any investigations that were made, which shows that any real inquiry was made on that point. I give whoever is to reply for the Government due warning now that we should like to know what investigations took place which enabled the Economic Secretary to make that statement. Judging from my inquiries, I do not believe that any earnest request was made for this information. I believe that the Treasury Bench could not care less what happened in this sense.
I see the Economic Secretary nodding. It is all right for him to do so. He was given opportunities in subsequent weeks at Question Time. He did not like the Questions, and he certainly never gave an answer. Things come to those who wait, and we will wait. We should like to know what inquiries were made then and what has been made since which have enabled any representative of the


Treasury to say that there is no evidence that the concession has not been harmful to the co-operative movement. I cannot believe that the matter was not looked at before I moved the Clause, because it was obvious to anyone who takes an interest that this matter would arise this afternoon. I shall await with interest an answer to the question.
Each year since 1956 we have pressed for this reform. In view of the handout to the Surtax payers, I feel that this year more than any other there is a case for our getting our share. It will be very revealing to see the attitude of Treasury Ministers towards the small savers of the co-operative movement in the way in which they deal with this point, bearing in mind the background of the Budget. We can only conclude that in this respect too little thought is given to the welfare of the people's movement. This may spring from lack of knowledge in the Treasury about the social work of the great co-operative movement, which I suggest justifies encouragement and not the discouragement which we have come to expect from the Treasury Bench in recent years in all aspects of co-operative trading operations. It is about time there was a change of heart.

Sir E. Boyle: How would the hon. Member explain the encouragement given by all Government Departments—by the Government collectively—to the Bill sponsored by the hon. Member for Glasgow, Govan (Mr. Rankin), at the beginning of the Session?

Mr. Dodds: Is that the best that the Government can do for the co-operative movement? There may have been a little help in one respect, but there have certainly been a lot of kicks which considerably outweigh that.
Does the Financial Secretary believe that that is the best that can be done for the co-operative movement? Is he satisfied that what is done is a great thing? We certainly do not. I could, if it were not out of order to do so, give a list of decisions made by the Government in recent years which are very discouraging to the co-operative movement. Nevertheless, I grant the one Bill which the hon. Gentleman has mentioned. I thank him very much for it, and hope it will encourage him to better efforts in the future.
In putting forward this scheme for the small saver in the co-operative movement, I remind the Government that the average amount of the individually held share capital in co-operative retail societies is about £20, and that these societies have just less than 13 million members. We do not ask for this concession to be extended to interest on co-operative loan capital, because there is no statutory limit on these forms of capital. We are being particularly reasonable in this. We ask for the concession only in respect of interest in co-operative shares and the Penny Bank accounts, where there is a statutory limit which is of very modest proportions when one considers the value of money now.
Never has there been a greater need to encourage co-operative small savings or, indeed, any small savings, because it looks as if this country is in for a rough time and that circumstances are such that it is in the national interest to give real encouragement—more than we have had so far from the Government—to the co-operative movement. The way to do that at present is to accept this Clause.
The co-operative societies play an important part in promoting thrift. During the last financial year nearly £60 million was returned to members by way of dividend. Over the past fifteen years this has amounted to over £1,000 million. Recently, it was shown that savings in the co-operative movement amounted to over £300 million, which included a figure of just over £250 million in share interest.
Although these are large sums of money, it should be remembered that they are the savings of nearly 13 million people. In the last 100 years or so, one of the most prominent features of the movement has been the encouragement of thrift—the putting away for a rainy day. That has done so much to alleviate acute distress among great numbers of families who have encountered hardship in troubled times.
I have in mind the remark made by my hon. Friend the Member for Sowerby (Mr. Houghton), who said that when he looked at the representatives of the Treasury here he thought that they looked rather like inverted Micawbers—looking not for something to turn up but for something to turn down. I can imagine that they cannot get at that Box fast


enough once again to take up the rôle of inverted Micawber. I cannot really believe, however, that we have so many stony-hearted Ministers at the Treasury at the moment, because what we are asking for is reasonable and would be a genuine encouragement to small savers at a time when such savings are needed.
The co-operative movement invests a goodly proportion of its surplus, after trading requirements, in Government securities. I remind the Financial Secretary of that, although we have said it every year. I hope that it is not forgotten. I doubt whether many organisations employ as much of their surplus in Government securities as the co-operative movement does. Above all, it is accumulation from the small savers, which is very important. At the moment, about 30 per cent. of co-operative investment is in Government securities. No doubt this is not as much as the Government would like. No doubt that is the basis on which they say that they cannot accept this proposal, in view of the position of savings in the trustee savings banks and the Post Office. We do not accept that argument. It is in the best interests of the Government to encourage rather than discourage these savings, particularly in these troubled times.
6.45 p.m.
Here is a golden opportunity to make up in part for past misdeeds by this Government in connection with the co-operative movement. By accepting this Clause, they can help to raise co-operative savings to a level similar to the Post Office and the trustee savings banks savings. I hope that the Treasury Bench believe that this matter is viewed in the movement with deep concern. We can but hope that this year the Government will do something to encourage the movement in its savings. That would be in the best interests of this country.

Mr. John Hall: Will the hon. Gentleman say whether the number of depositors in co-operative societies during the last twelve months has increased or decreased?

Mr. Dodds: There is no marked difference, but, taking into account past years, we believe that there should have been a substantial increase. There has not been, however., It is not good enough to say that because the number has not

gone down the movement has not suffered as a consequence. The history of the movement is of steady progress, and that has not been maintained in a satisfactory way.

Mr. Laurence Pavitt: I support my hon. Friend the Member for Erith and Crayford (Mr. Dodds) who has made out a most complete and comprehensive case for the Clause. I differ slightly from him in recognising that the Government have this year come a little way towards us in supporting the Industrial and Provident Societies Bill introduced by my hon. Friend the Member for Glasgow, Govan (Mr. Rankin), and also the Consumer Protection Bill introduced by my hon. Friend the Member for Bilston (Mr. R. Edwards). Nevertheless, we come again to the charge of unfair discrimination against a very large section of the community through differentiation in the terms and encouragement for small savings in the co-operative societies and in other organisations.
In common with many other hon. Members on both sides of the Committee, once a year I find myself speaking at a rally to encourage small savings. It is usually initiated by the regional organiser of the National Savings Movement. The mayor, members of the local council, other local dignitaries and I all give great praise to those in the community who have helped the Government by saving and to the voluntary collectors who facilitate it. Each year when the Chancellor of the Exchequer presents his Budget he makes great play of giving thanks to the many people who have helped the Exchequer by saving and to the National Savings Movement.
It is in that light that we are trying to press the Government to help us in our efforts to increase small savings by ordinary people through the medium of the co-operative societies. It often seems difficult to get right hon. and hon. Gentlemen opposite to understand the fundamental difference between shares in a co-operative society and shares in a joint stock company, and also the vast difference between the outlook of the ordinary person who put his money into a society in a similar fashion and with a similar mental attitude to that of an


ordinary bank customer, and the outlook of a person buying shares on the Stock Exchange who, especially if the latter is a "bull", buys shares with money he has not got or is a "bear" who sells shares which he has not got in order to make a profit. There is an absolute difference, not only financially but mentally and psychologically, in the Government's approaches to the different sectors of finance, the joint stock companies, on the one hand, and co-operative societies on the other.
The savings of the little man, for which we are asking for exemption, have no capital appreciation. If £1 is put into a co-operative society in 1900, in 1961 it is still £1. Unfortunately, owing to the lower value of the £, £1 put in in 1900 no longer buys as much as it did in those days. Nevertheless, all the time it is in the society it receives a fixed interest, which never amounts to more than 3½ per cent. and which is a fixed rate in the same way that the Post Office Savings Bank rate is fixed.
There is never any question of a golden hand-out of a one-for-one share bonus to the person whose money has accumulated in a co-operative society. He is never in the position of suddenly having a one-for-one share bonus declared so that he gets extra shares and so that his original holding of £9 8s. 6d. becomes nominally worth £18 17s. The way in which the money is accumulated is not understood by the Treasury.

Sir E. Boyle: I do not want to interrupt the hon. Member unnecessarily, but I am not sure that he fully understands the workings of the London Stock Exchange.

Mr. Pavitt: For my sins, I spent half-a-dozen years on the floor of the London Stock Exchange and I have worked both in stockbrokers' and stock jobbers' offices. I assure the hon. Member that although I learned my misdeeds early and managed to get out of it, I spent some time in stock jobbing and stock-broking. His comment probably arose because I used the odd number of shillings rather than the normal formula and one does not invest in shares at odd amounts, as a rule, although there are stock units, as the hon. Gentleman knows.
I return to the basic and fundamental differences which affect the Clause.

Savings accumulated in the form of the share capital are the essence of our argument. What invariably happens is that a person receives a dividend upon goods purchased in a co-operative shop and, instead of being drawn out, that divident remains, so that over a period of years capital is accumulated. That is the only way in which a person living on a weekly income which is very narrow can ever accumulate savings. I was most fortunate in my early life because all the pairs of shoes which I wore as a child were purchased as a result of savings accumulated in the local co-operative society by my mother. That was at a time when shoes for the children of working men were not always quite so plentiful as they are now.
The question that a co-operative society faces is whether people should be persuaded to spend the money they get as dividends in the shop where they draw them, thus increasing the prosperity of that society, or whether they should be persuaded to retain that money as part of their savings. This is a difficult problem. If one is seeking to do the best possible for the business, there is a temptation to point out that if the money is saved Income Tax will have to be paid on it and that it might as well be spent to provide some immediate benefit. We would like to be able to persuade people to put more and more away, so that these 13 million small investors can accumulate savings against a rainy day. If they are persuaded to put the money away when it is paid as dividends at the end of the half year, that may be of assistance in the autumn when the Chancellor's regulators will probably go to work with a view to mopping up too much money chasing too few goods. That is one reason why at this time the Chancellor should accept this provision.
My hon. Friend the Member for Erith and Crayford said that the present membership of co-operatives was about 13 million, which is one in four of the population. But that is out of the total population of men, women and children. The working population is 26 million or 28 million, so that, roughly, one in two of the working population is a member of a co-operative society. In a debate the other day it was pointed out that at Barnsley every single magistrate, including the chairman of the


local Conservative Party, was a member of a co-operative society. This is not just a small section of the community but a very wide section.
Can there not be some social justice so that this quarter of the population is given precisely the same benefits which it would get if it put money in the Post Office Savings Bank? Last week a very small section of the community benefited to the extent of £83 million through the Finance Bill, and of this sum, the Chancellor is prepared to give back £19 million in respect of unearned income to people in the Surtax bracket. Why should there not be some slight concession in the case of people with savings of less than £20? My own society, the London Society, has a membership of 1,300,000 and a capital of about £17½ million, so that the average is very much less than £20 per member. Surely it is possible for the Chancellor, without sending the country bankrupt, to make this very small concession for the ordinary person saving through co-operatives and similar organisations.
This concession would be an advantage not only for the capital accumulation within the society but, because the share capital is withdrawable and not transferable—which means that inevitably a high degree of liquidity has to be maintained as a large part of the money has to be easily accessible—a very large percentage must always go into Government securities. At the moment that figure is about 30 per cent. Thus, in effect, the co-operative societies are doing a job for the Government by canalising money not into blue chips and speculative securities but into Government funds and local authority loans. Thus, the Clause should be of great benefit not only to the 13 million co-operators but to the Government. I hope that this year the Government will say that, at a time when they have been so generous to Surtax payers, at least the little men and women who are members of co-operative societies will get their due rights.

Dr. J. Dickson Mabon: When the Financial Secretary intervened to interrupt my hon. Friend the Member for Erith and Crayford (Mr. Dodds), he demonstrated quite well the remarkable schizophrenia of the Government in relation

to the co-operative movement. It is perfectly true that in 1952 and again this year the Government agreed to amend the Industrial and Provident Societies Acts to allow the amount of share capital in co-operative societies to rise from £200 to £500, in 1952, and to £1,000 this year. But it is also perfectly sensible to recognise that the Government did not do that out of benevolence, or because of their good disposition towards the co-operative movement, but because of their feelings towards a certain part of it.
In other words, whenever an agricultural co-operative society comes forward with suggestions, the Government look upon them benignly, but whenever we who apparently represent mainly retail or wholesale co-operative societies—although we protest about that being said—make suggestions, the Government immediately suspect us of special pleading and insist that they will not take action and that this is a vested interest. We protest about this attitude and say that the Government should take a fresh, balanced view.
When out of office, the Conservatives, in their Industrial Charter and various other declarations, proclaimed their belief in co-partnership—echoing the Liberal Party policy of co-ownership. They never denounced the co-operative movement ideologically at any time, although in the House of Commons it often appears that many of them are antipathetic to it and that some of them are fast asleep as tonight, when these matters are discussed.
It is somewhat irrational of the Government to agree to the improvement of the Industrial and Provident Societies Acts and to be willing to beat their breasts about it, as the Financial Secretary did, claiming that they are well disposed to the co-operative movement, when they will not listen to sensible argument on the matter of the interest on shares. We have this performance far too often in Finance Bills. We constantly come up against instances where the Government fail to produce the facts. Unfortunately for us, we are unable to produce the collective facts which might buttress a collective argument on this matter. All that we can do is to recite the knowledge that we have of our own societies.
7.0 p.m.
It is true that many people who would otherwise leave their interest to accumulate in the co-operative movement take the money out at the appropriate time and spend it. They do not put it into the Post Office. This proposal is not intended to take money which would otherwise go into the Post Office and put it into the co-operative movement to fructify and develop the movement in its trading capacity.
I believe that that is one cause of the Government's attitude. I believe that that is why they are adamant about this. Why do the Government not produce facts to substantiate their claim? They were invited to do so last year. They have been unable to produce such evidence, and I am convinced that we will not hear it tonight. What is the position of the Government? Their attitude is one of prejudice, and unthinking prejudice at that, and this, from the Financial Secretary, is a bit much. We expect something more from him. It is said that a man's best friend is his dogma. The Financial Secretary ought to think about these prejudices and try to justify them in a rational way.
If it is the case that at the moment people draw their money out, is it not in the national interest that we should enable the societies to accumulate this money? I am willing to concede the argument that if people leave their money in the co-operative movement to the extent which the hon. Gentleman claims—and the Government have given their blessing to the increased amount which can be invested—the co-operative movement is perhaps able to compete more effectively in the distributive fields. If that is why the Government are against the co-operative movement expanding, that they do not wish to give it any advantage of any kind, they ought to say so. They ought to be quite blunt about it.
I am a co-operative member, and I am not abashed about it. I do not apologise for being a member. I am proud of it. If the hon. Member for Swindon (Mr. F. Noel-Baker) gets his way, and we all have to declare our incomes and affiliations on both sides of the House, no doubt there will be many surprises, but there will be no surprises in the cases of my hon. Friends. We have long ago openly declared our interests.
In the co-operative movement one can own as many shares as one likes up to the legal limit, but one has only one vote. That makes a substantial difference. There are no capital gains in the co-operative movement. There may be a collective gain for the movement, but there is no gain for an individual shareholder.
If we applied a little grey matter—not you, Sir Samuel, because I know that being an impartial chairman you sympathise with us—I am sure that the Government would see that there is an ideologically fundamental difference between an association of individuals under the Industrial and Provident Societies Acts and another association under the Companies Act. There ought, therefore, to be a fundamental difference in the fiscal treatment of two such associations.
Our argument is based on a national and not only on a co-operative movement point of view. We would help the National Savings drive if we were able to get this movement in as one more part of the five-pronged campaign by the Government to develop National Savings. If we exempt this part of people's savings, the Government will take one more step towards improving the position of National Savings.
I should like to see that argument rebutted. I should like to see these points taken in that order. We do not want, and I hope that we will not get, the usual nonsense from the Government; a series of contradictory arguments about favouritism, without an acknowledgment of the peculiar position in the economy of the co-operative movement. We want a straight-shooting contribution from the Treasury Bench. If the Government do not like the co-operative movement as such, let them say so. If they do that, they will offend their agricultural friends. They will offend the people who helped to sponsor the Bill which my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) carried through the House not long ago.
It is obvious that the Tory Party has not thought this out. It ought in our modern society to have shed this class prejudice about the co-operative movement. It ought to be able to recognise the position of the co-operative movement in this country. It ought to recognise that it has a valid position, just as


the trade union movement is often said to be the fourth estate of the realm. The Government ought to be prepared to look at this again and make this concession because of the co-operative movement's unique position in the economy.

Mr. A. E. Oram: The case for the acceptance of this new Clause has been argued this evening, as it was in earlier years, largely from the point of view of the consumer retail co-operative society. My hon. Friends have acknowledged their association, as I do mine, with that side of the co-operative movement, but I urge the Financial Secretary to consider this also from the point of view of the agricultural and horticultural co-operative societies.
It has been pointed out several times that a Bill has recently been passed raising the limit on the individual holding of share capital in the co-operative movement from £500 to £1,000. The Financial Secretary rightly pointed out that the Government gave full support to that Measure, and in that way showed their sympathy with co-operative development.
It was clear from the introductory speech of my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) when he introduced that Bill that the co-operative interests particularly anxious that the Bill should be passed were the agricultural co-operatives. The retail societies had no objection to the Bill, but they were not so directly concerned as were the agricultural co-operatives.
We welcome this friendly attitude by the Government, and we know that there are many hon. Gentlemen opposite who support the development of co-operation in farming communities. We are also pleased to recall that during the last Session the Government passed the Horticulture Bill. We were glad to support that Bill because it provided for Government funds to be set aside for the encouragement of co-operatives among horticulturists.
We give due credit to the Government for those things, but, if they genuinely want to encourage co-operative societies, why not accept the new Clause, because this is one of the most effective ways in which the Government could help to

encourage the development of agricultural co-operatives? This new Clause is of equal significance to agricultural co-operatives as it is to the societies for which I and my hon. Friends speak, if not proportionately more so, because the farmers' co-operatives do not have thousands of members on whom they can call for small collections of capital. In a farmers' co-operative society there are a few thousand at the most. It is evident that with a few thousand or even a few hundred people getting together to form a co-operative society, each contribution of capital must be the greater. That is why the range between £500 and £1,000 is very important to the organisers of farmers' co-operatives.
Let us now consider the matter from the point of view of the interest payable on that range of shareholding as it concerns people who, when my hon. Friend's Bill ultimately becomes law, will be asked to deposit with their farmers' co-operatives sums in excess of £500. In these societies, as in the retail societies, interest payments are kept to a minimum of about 3 per cent. That is part of the co-operative principle. Three per cent. of £1,000, which it is hoped farmers will contribute to their societies by way of capital, amounts to £30, and the Income Tax on that—which will be chargeable unless the Clause is accepted—is a significant amount for a farmer to pay.
Consequently, as soon as my hon. Friend's Bill becomes law, thousands of co-operative farmers will be faced with an immediate and practical dilemma. They will want to support their neighbours in the formation or development of a co-operative society. That society will need more capital, and will be calling upon its members to invest more capital, but if they do so they will have to pay Income Tax on the interest which those shares will earn. By not accepting the Clause the Government are going in the exactly opposite direction to that which they took, and which we welcomed, in the Horticulture Act and my hon. Friend's Industrial and Provident Societies Bill, From the logic of that point alone I urge the Government to give further thought to this matter, from the point of view of the most welcome development in the agricultural communities, which they and their supporters profess to support. Tonight provides the test whether they wish to encourage the


development of co-operative forms of enterprise. If they genuinely wish to do so they will accept the Clause; if not, their claims to be the friends of co-operators are very suspect.

7.15 p.m.

Mr. John Rankin: The Financial Secretary intervened to use the Bill which I had the privilege of promoting as an example of the Government's good intentions towards the co-operative movement. On various occasions I have indicated my appreciation of the help which I received from the Government Front Bench and also from back benchers in putting my Bill through the House. I do not suggest that if that Bill had been concerned solely with the consumer side of the movement it would have had some difficulty in finding its way through the House. But I do not think it would be wrong to say that because it also affected the producers its passage was considerably helped.
Nevertheless, those of my hon. Friends who are interested in and belong to the co-operative movement pay tribute to the help we received in putting that Bill through. I hope that the Financial Secretary will adopt the suggestion made by my hon. Friend the Member for Erith and Crayford (Mr. Dodds) and confirm the attitude of the Government in the case of the Industrial and Provident Societies Bill as being merely their first instalment of the help they are to give us. Tonight is the Government's chance. The Financial Secretary will have realised from what has been said that within the co-operative movement there is a deep sense of grievance because of its members' firm belief that the Government discriminates against them.
The hon. Member for Wycombe (Mr. John Hall) asked whether the number of depositors in the savings side of the co-operative movement had increased or decreased. He meant to fertilise that question a little further by showing that if the number of depositors had increased it was an argument against any help being given by the Treasury. The fact is that the number of depositors has neither increased nor decreased, but the amount of savings—the amount of dividends left in the care of the societies—has diminished. That is because people today are finding it harder to live. Those who purchase with the co-operative societies feel that at the end

of the six months they cannot allow their dividends to remain within the society as capital, and for the most part they withdraw them because they are finding life very hard under this Tory Government, despite the Prime Minister's assurance that they have never had it so good. The number of depositors has not varied much, but the amount of savings has decreased.
That emphasises not merely the difficulty which people have in saving; it also shows the disadvantage under which the co-operative movement labours. It cannot go into the open market and borrow money in the way that joint stock companies do. It pays a lower rate of interest, and in doing so it is helping the Government to keep the price of money low. Whether that is a good or a bad thing is a matter for argument. It may be to the disadvantage of the societies, but they are nevertheless helping to keep the price of money lower than the Government can keep it. Because they are not profit-making organisations, they cannot afford to pay the market rate for money.
Last week the Chancellor told me that the Government could not lend money at less than about £8 per cent. interest to the under-developed territories. That is the price which the Government are now charging. They cannot reduce that. But the co-operative movement does not, as a rule, pay more than 4 per cent. on its loan capital, and, I think, 3½ per cent. on share capital, or less. Because of that it cannot attract money from the open market in competition with the Government, or any other money lending agency. That is a tremendous disability in a capitalist world. The co-operative movement does not try to operate in keeping with capitalist principles, because it is not producing commodities for profit. But the hon. Gentleman and his right hon. and learned Friend continue to treat the movement as if that was what it was doing, and in that way the Chancellor discriminates against us.
We have detailed examples of discrimination and I will not repeat them. The Chancellor discriminates against co-operative savings in relation to Post Office savings. We do not in the least object to savings in the Post Office and the interest on them receiving preferential treatment, but, if preference is to be given there, we feel that logically the


Chancellor should give the same sort of preference to the co-operative movement, because, like the Post Office, it is fundamentally a non-profit-making body.
As we told the Chancellor last week, he discriminates in relation to the Profits Tax—I hope that the advice being given to the Financial Secretary by the hon. Member for Scarborough and Whitby (Sir A. Spearman) will be useful to the hon. Gentleman. Not only does the Chancellor discriminate in this way, but also in the treatment of capital possessed by certain members of the community. When they apply for assistance their co-operative savings are treated differently, and more unfairly, than savings from other sources. Those are three examples. But the most topical and, in my view, the most unfair act of discrimination is in the present Budget, where the right hon. and learned Gentleman has given a rebate of £83 million to the Surtax payers. That money is to be distributed among a small, select group in the community, numbering, I should say, at the most about 300,000 people. I do not know whether I have exaggerated their number or underestimated it. At the same time the right hon. and learned Gentleman is refusing to give £2 million to 13 million members of the co-operative societies.
That is all that the proposal in this new Clause would cost the right hon. and learned Gentleman if he accepted them. The Economic Secretary gave that answer about the cost a year ago. So that to one section of the community in this Finance Bill the Chancellor of the Exchequer is giving £83 million; to a small group, not nearly so important as the co-operative membership which for the most part is comprised of people who really work. Those in the group which is getting the £83 million live largely on their wits. Of course they do, and the Financial Secretary knows that perfectly well.
These are the sort of things that create grievances in the minds of the great mass of working-class people for whom we have the privilege of speaking in this Committee. If the Financial Secretary's intentions are as good as he indicated when he was referring to my Measure, now is the chance for him to put them into operation. I know that he is a very learned person. So, I believe, is

the Economic Secretary. I believe that they are both dons.

Dr. Dickson Mabon: They are Spanish dons.

Mr. Rankin: I am not going to use any adjective or qualification.
They know all about the ten-year war with Troy, and all those other things, but in this Chamber last year we finished another ten-year war—a war about the cinema tax. We fought it in this Chamber for ten years, and finally the Chancellor gave way. Now the cinema tax has been abolished. The right hon. and learned Gentleman is facing what may prove to be another ten-year war. It will be a co-operative war, and it will go on, assuming that the Financial Secretary and the Economic Secretary continue to sit on the Government Front Bench. It will be a war to do away with discrimination against the co-operative movement such as is practised by this Government on the lines which we have indicated.
I do not know whether the hon. Gentleman is prepared to wage that war. His easiest way out would be to sue for peace now. I have always been told that no war is worth waging. Sometimes one emerges worse off than at the beginning. So why waste all the fine speeches which the hon. Gentleman will be making? Why waste all the beautiful words he will be using for the false cause he will be espousing? Why waste time on these things? Why not accept our new Clause now and save time? Time is money, and money is the thing which the Chancellor wishes to save and that is why he is trying to knock a few odd "bobs" out of the co-operative movement.
Of course, the right hon. and learned Gentleman knows that £2 million is nothing and that he would not miss it. He could have taken it out of the £83 million quite easily. That would have saved a great deal of worry and the need to listen to many speeches, with the knowledge that those speeches will be delivered again next year, if necessary, and the year after. There will be no use in saying, as was said last week, that we have heard it all before. That was said about the cinema tax, but in the end the Government gave way. They will hear these speeches again. The subject will be pursued from different angles,


but the speeches will be heard. We wish to avoid hearing the same replies, and tonight the hon. Gentleman has a chance to say something new—that he will accept the new Clause

7.30 p.m.

Sir E. Boyle: Just to get the record straight, may I say that the Economic Secretary is not a university lecturer, and neither am I.

Mr. Rankin: I did not say that the hon. Gentlemen were.

Sir E. Boyle: The hon. Gentleman said that we were dons.

Mr. Rankin: The use of the word "don" in Scotland is somewhat different from its use in England. When we use it we mean a brilliant fellow.

Sir E. Boyle: To get the record completely straight, my hon. Friend the Economic Secretary obtained a first-class degree in law as a prisoner of war, and I obtained a third-class degree in modern history at Oxford. Therefore, my hon. Friend can claim to be more learned than I, but neither of us can claim to be learned in ancient history.
Perhaps we had better get back now to the Clause, but I must say that when I was listening to the hon. Member for Glasgow, Govan (Mr. Rankin) I was occasionally reminded of the rather lengthy speeches of the Homeric epics.
The object of this new Clause is to extend to dividends or interest on shares or deposits in co-operative societies the benefits of the existing Income Tax relief on the first £15 in a Post Office Savings Bank, or the ordinary department of a trustee savings bank. That existing relief dates from the Budget of 1956. With no disrespect to anyone who has taken part in the debate this evening, it seems that we have got rather away from the relief and the reasons why it was originally introduced.
The relief was originally intended as a specific incentive to the small saver to lend to the Government and trustee savings banks. It was confined to individuals, and does not cover trusts and corporate bodies, but those deposits which attract a rate of interest of 2½ per cent. It does not cover the deposits in the special investment department of

trustee savings banks which are not lent directly to the Government and on which a higher rate is paid, nor other Government securities such as Defence Bonds.
Naturally enough, as I well remember, five years ago pressure developed during the Committee stage of the 1956 Finance Bill for the extension of this relief to friendly societies, co-operative societies, building societies, municipal banks, joint stock banks and a variety of miscellaneous savings institutions. The Prime Minister, who was then Chancellor of the Exchequer, made it quite clear that he proposed to restrict the concession firmly to savings institutions which had two features—first, that the rate of interest should be static at 2½ per cent. and, secondly, that the money saved would pass directly to the Government.
These were not at all arbitrary conditions. They were essential to the whole purpose which my right hon. Friend the Prime Minister had in mind when making this concession. My right hon. Friend was not just seeking, in a general way, to encourage small saving. The whole point of the concession was to encourage small savers to make a kind of voluntary contribution to the Budget surplus at a time when, as now, budgetary policy was a factor of first-class importance for the management of the economy. As my right hon. Friend explicitly pointed out during the Committee stage debate, it was essential that the money saved should pass directly to the Government, because it would enable more of the State's borrowing needs to be met without increasing the liquidity of the joint stock banks.
As a result of the debate we had in Committee in 1956, Treasury Ministers—of whom I was one—agreed in principle to extend that concession to any savings institution which was ready and able to adopt the two essential features of a 2½ per cent. rate of interest, and direct investment of all deposits with the State by forming a separate department as a trustee savings bank. In the upshot, when we reached the later stages of the Bill, the only body ready to take action on these lines was the Birmingham Municipal Bank and for that reason an Amendment was inserted enabling that institution to come into the scheme.
It seems to me, five years later, that the arguments today are exactly the same as they were in 1956. I am putting exactly the same case as I would have put five years ago. I should make it quite plain that there is no question here of any prejudice by the Government against retail co-operation. In answer to the hon. Member for Greenock (Dr. Dickson Mabon), who made a very agreeable speech to the Committee, I think I can say that I am as relatively free from class prejudice as most Britishers. I am not terribly friendly to pretty well all dogmas but, looking on this proposal on its merits in the terms of the 1956 proposals, we have to realise that co-operative societies pay only modest rates of interest.
Of course I realise that the amount of shareholdings in the societies is limited by statute to £500 and that savings deposited in the co-operative movement are valuable from the economic point of view at a time of heavy pressure on our resources and, most relevant perhaps, I realise that co-operative societies invest a large proportion of their surplus funds in Government securities. That is all true, but the fact remains that the existing relief was given for the specific purpose of encouraging lending at a modest rate of interest direct to the Government.
The mere fact that the deposits of an institution such as a co-operative society may be invested in Government securities does not mean that an increase in those deposits automatically helps Government's budgetary and monetary policies. Such an increase may involve no more than the purchase of securities from other holders. The co-operative societies use the money invested in them primarily to finance trading. They cannot claim to be purely savings agencies. If we admitted the claim of all co-operative societies to the 1956 concession, it would be almost impossible to withhold a similar concession from a whole range of institutions whose case would be at least as strong.
This is an important point, because the 1956 concession, although I believe it was fully worthwhile on economic grounds, was by no means cheap, as I know the Committee realised. The amount of relief which will be given under this concession as it stands is in

1961–62 likely to be approximately £12 million. If we were to extend the exemption to dividends and interest from industrial and provident societies and registered friendly societies, the extra cost would be about £2 million in a full year. As I have explained, I do not believe we could stop there. I believe that we should be driven further and further towards exemption for the first £15 of investment income generally. This would cost a further £38 million in a full year which, quite apart from any short-term budgetary considerations, is a far larger sum than any Chancellor could ever contemplate for this sort of purpose.
I must therefore ask the Committee to accept the continuation of the limits to this concession which have been in force ever since 1956, and to reject this new Clause. In answer to the hon. Member for Erith and Crayford (Mr. Dodds), to whom I listened with attention and who made a forceful speech—and we welcome him to these debates—there is no evidence that shareholders or depositors in co-operative or friendly societies have switched their savings into Post Office savings banks on a large scale. There is no evidence that that has happened, but, in view of what he said, I shall look into the matter further and write to him about it.

Mr. Dodds: Last year the Economic Secretary said that inquiries had been made. We had subsequent tussles in the House. I challenged him or the Financial Secretary to say whether that investigation was made. I repeat that I do not believe it was made. This clearly indicates that we were fobbed off, because it is difficult to find this information. In a very limited circle, I know of people who have withdrawn their money as a consequence. Even the secretary of a co-operative society does not know why people withdraw their money, but I happen to know several people who have withdrawn their money because of this concession given to the Post Office. Therefore, I say to the hon. Gentleman that, unless he can bring convincing information to the contrary, I cannot accept that an investigation has been made. I am surprised that last year the statement was made by the Economic Secretary when he had no information which was worth bringing forward.

Sir E. Boyle: The hon. Gentleman has delivered his rebuke. Both my hon. Friend the Economic Secretary and I have listened to what he said this evening. It was exactly for that reason, with no intention of fobbing anybody off, that I said that I had taken note of his point and would look into the matter further with my hon. Friend and communicate with the hon. Gentleman.
In so far as the co-operative movement, as I fully recognise, is facing some difficulties at present, I believe that they arise far more from increased trading competition than from any substantial reduction in its share and deposit funds. I say with all friendliness, and meaning no at all to retail co-operatives, that I wonder whether some of the things the hon. Member for Erith and Crayford said this evening were in the best interests of the co-operative movement. In the closing parts of his speech he seemed to be making things out to be more difficult than they really were. He has raised the point and I will certainly communicate with him after reviewing the evidence.

Mr. George Darling: The difference between the Financial Secretary and ourselves is that we do not believe that we are asking for special concessions in taxation in respect of the small savings invested in co-operative societies. I agree, as I am sure that my hon. Friends agree, that co-operative societies are not purely savings institutions. They are, in our view, mainly savings institutions. We do not disagree that, if this concession, if I can call it so for the moment, were granted, it would encourage savings in other similar institutions

and the relief would have to be given to other institutions which have the same kind of fixed capital, fixed interest rates, and so on.

The arguments of my hon. Friends are based on the assertion that savings in co-operative societies and deposits in the Post Office Savings Bank and trustee savings banks are identical in character and should be taxed in precisely the same case. That is the substance of their case. It has been very ably presented, and there is no point in going over it again. It has not been satisfactorily answered by the Financial Secretary. I am sure that it will not be satisfactorily answered by his successor, until we get a change of Government, when a different view will prevail.

There is no point in saying, as the Financial Secretary said, that because the Chancellor of the Exchequer in 1956, the present Prime Minister, did something we should continue to do it now. The fact that he then made a profound mistake, in our view, is one of the reasons why we think that the Clause should be accepted and included in the Bill. As the Financial Secretary made it quite clear that the mistake which was made in 1956 is to be continued, my hon. Friends will be quite justified in registering their dissatisfaction with the Government's view and their disappointment with the Financial Secretary's reply by voting for the inclusion of this Clause in the Finance Bill.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 165, Noes 235.

Division No. 211.]
AYES
[7.43 p.m


Ainsley, William
Crosland, Anthony
Grey, Charles


Allaun, Frank (Salford, E.)
Cullen, Mrs. Alice
Griffiths, David (Bother Valley)


Allen, Scholefield (Crewe)
Darling, George
Griffiths, Rt. Hon. James (Llanelly)


Awbery, Stan
Deer, George
Grimond, J.


Bacon, Mist Alice
Diamond, John
Hale, Leslie (Oldham, W.)


Baxter, William (Stirlingshire, W.)
Dodds, Norman
Hall, Rt. Hn. Glenvil (Colne Valley)


Bence, Cyril
Donnelly, Desmond
Hamilton, William (West Fife)


Benson, Sir George
Driberg, Tom
Hannan, William


Blyton, William
Dugdale, Rt. Hon. John
Hart, Mrs. Judith


Boardman, H.
Ede, Rt. Hon. C.
Hayman, F. H.


Bowden, Herbert W, (Leics, S.W.)
Edelman, Maurice
Henderson, Rt. Hn. Arthur (Rwly Regis)


Boyden, James
Edwards, Rt. Hon. Ness (Caerphilly)
Herbison, Miss Margaret


Braddock, Mrs. E. M.
Edwards, Robert (Bilston)
Hewitson, Capt. M.


Brockway, A. Fenner
Edwards, Walter (Stepney)
Hill, J. (Midlothian)


Broughton, Dr. A. D. D.
Fitch, Alan
Hilton, A. V.


Brown, Rt. Hon. George (Belper)
Fletcher, Eric
Holman, Percy


Butler, Mrs. Joyce (Wood Green)
Foot, Michael (Ebbw Vale)
Holt, Arthur


Callaghan, James
Fraser, Thomas (Hamilton)
Houghton, Douglas


Chapman, Donald
Gaitskell, Rt. Hon. Hugh
Howell, Charles A. (Perry Barr)


Chetwynd, George
Gordon Walker, Rt. Hon. P. C
Howell, Denis (Small Heath)


Craddock, George (Bradford, S.)
Gourlay, Harry
Hoy, James H.




Hughes, Emrys (S. Ayrshire)
Moody, A. S.
Smith, Ellis (Stoke, S.)


Hughes, Hector (Aberdeen, N.)
Mort, D. L.
Soskice, Rt. Hon. Sir Frank


Hunter, A. E.
Moyle, Arthur
Spriggs, Leslie


Hynd, H. (Accrington)
Mulley, Frederick
Steele, Thomas


Irvine, A. J. (Edge Hill)
Neal, Harold
Stewart, Michael (Fulham)


Janner, Sir Barnett
Noel-Baker, Rt. Hn. Philip (Derby, S.)
Stonehouse, John


Jay, Rt. Hon. Douglas
Oliver, G. H.
Stones, William


Jones, Rt. Hn. A. Creech (Wakefield)
Oram, A. E.
Strachey, Rt. Hon. John


Jones, Dan (Burnley)
Oswald, Thomas
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Jones, J. Idwal (Wrexham)
Owen, Will
Sylvester, George


Jones, T. W. (Merioneth)
Padley, W. E.
Symonds, J. B.


Key, Rt. Hon. C. W.
Paget, R. T.
Taylor, Bernard (Mansfield)


King, Dr. Horace
Pannell, Charles (Leeds, W.)
Taylor, John (West Lothian)


Lawson, George
Parker, John
Thompson, Dr. Alan (Dunfermline)


Lee, Frederick (Newton)
Parkin, B. T.
Thomson, G. M. (Dundee, E.)


Lever, L. M. (Ardwick)
Pearson, Arthur (Pontypridd)
Thornton, Ernest


Logan, David
Peart, Frederick
Timmons, John


Mabon, Dr. J. Dickson
Pentland, Norman
Tomney, Frank


McCann, John
Popplewell, Ernest
Ungoed-Thomas, Sir Lynn


MacColl, James
Prentice, R. E.
Wade, Donald


McInnes, James
Price, J. T. (Westhoughton)
Wainwright, Edwin


McKay, John (Wallsend)
Probert, Arthur
Whitlock, William


Mackie, John (Enfield, East)
Pursey, Cmdr. Harry
Wilcock, Group Capt. C. A. B.


MeLeavy, Frank
Rankin, John
Wilkins, W. A.


Mallalieu, J.P.W. (Huddersfield, E.)
Reid, William
Willey, Frederick


Manuel, A. C.
Roberts, Albert (Normanton)
Williams, D. J. (Neath)


Mapp, Charles
Roberts, Goronwy (Caernarvon)
Willis, E. G. (Edinburgh, E.)


Marquand, Rt. Hon. H. A.
Robertson, John (Paisley)
Wilson, Rt. Hon. Harold (Huyton)


Mason, Roy
Robinson, Kenneth (St. Pancras, N.)
Winterbottom, R. E.


Mayhew, Christopher
Rogers, G. H. R. (Kensington, N.)
Woodburn, Rt. Hon. A.


Mellish, R. J.
Ross, William
Wool, Robert


Millan, Bruce
Short, Edward
Yates, Victor (Ladywood)


Milne, Edward J.
Slater, Mrs. Harriet (Stoke, N.)



Mitchison, G. R.
Slater, Joseph (Sedgefield)
TELLERS FOR THE AYES:


Monslow, Walter
Small, William
Mr. Sydney Irving and Mr. Redhead.




NOES


Agnew, Sir Peter
Crosthwalte-Eyre, Col. Sir Oliver
Hendry, Forbes


Aitken, W. T.
Cunningham, Knox
Hiley, Joseph


Allan, Robert (Paddington, S.)
Curran, Charles
Hill, Mrs. Eveline (Wythenshawe)


Arbuthnot, John
Currie, G. B. H.
Hill, J. E. B. (S. Norfolk)


Atkins, Humphrey
Dalkeith, Earl of
Hinchingbrooke, Viscount


Balniel, Lord
Dance, James
Hirst, Geoffrey


Barber, Anthony
d'Avigdor-Goldsmid, Sir Henry
Holland, Philip


Barter, John
Deedes, W. F.
Hollingworth, John


Batsford, Brian
de Ferranti, Basil
Hopkins, Alan


Baxter, Sir Beverley (Southgate)
Digby, Simon Wingfield
Hornby, R. P.


Beamish, Col. Sir Tufton
Donaldson, Cmdr. C. E. M.
Howard, John (Southampton, Test)


Bell, Ronald
du Cann, Edward
Hughes Hallett, Vice-Admiral John


Bennett, F. M. (Torquay)
Duncan, Sir James
Hughes-Young, Michael


Bennett, Dr. Reginald (Gos &amp; Fhm)
Eden, John
Hurd, Sir Anthony


Bidgood, John C.
Elliot, Capt. Waiter (Carshalton)
Iremonger, T. L.


Biggs-Davison, John
Elliott, R. W. (Nwcstle-upon-Tyne, N.)
Irvine, Bryant Godman (Rye)


Bishop, F. P.
Emery, Peter
Jackson, John


Black, Sir Cyril
Errington, Sir Eric
James, David


Bourne-Arton, A.
Farey-Jones, F. W.
Jenkins, Robert (Dulwich)


Boyle, Sir Edward
Farr, John
Johnson, Eric (Blackley)


Braine, Bernard
Finlay, Graeme
Johnson Smith, Geoffrey


Brewis, John
Fisher, Nigel
Jones, Rt. Hn. Aubrey (Hall Green)


Brooman-White, R.
Fraser, Ian (Plymouth, Sutton)
Kaberry, Sir Donald


Brown, Alan (Tottenham)
Freeth, Denzil
Kerby, Capt. Henry


Browne, Percy (Torrington)
Gammans, Lady
Kerr, Sir Hamilton


Bryan, Paul
Gardner, Edward
Kirk, Peter


Buck, Antony
Gibson-Watt, David
Kitson, Timothy


Bullus, Wing Commander Eric
Glover, Sir Douglas
Lambton, Viscount


Burden, F. A.
Glyn, Dr. Alan (Clapham)
Leather, E. H. C.


Campbell, Sir David (Belfast, S.)
Goodhart, Philip
Legge-Bourke, Sir Harry


Campbell, Gordon (Moray &amp; Nairn)
Goodhew, Victor
Lewis, Kenneth (Rutland)


Carr, Compton (Barons Court)
Grant, Rt. Hon. William
Lindsay, Martin


Carr, Robert (Mitcham)
Grant-Ferris, Wg Cdr. R.
Linstead, Sir Hugh


Cary, Sir Robert
Green, Alan
Litchfield, Capt. John


Clark, Henry (Antrim, N.)
Grimston, Sir Robert
Lloyd, Rt. Hon. Selwyn (Wirral)


Clark, William (Nottingham, S.)
Grosvenor, Lt.-Col. R. G.
Longden, Gilbert


Clarke, Brig. Terence (Portsmth, W.)
Gurden, Harold
Loveys, Walter H.


Cleaver, Leonard
Hall, John (Wycombe)
Low, Rt. Hon. Sir Toby


Cole, Norman
Hamilton, Michael (Wellingborough)
Lucas-Tooth, Sir Hugh


Cooke, Robert
Harris, Reader (Heston)
McAdden, Stephen


Cooper-Key, Sir Neill
Harrison, Col. Sir Harwood (Eye)
MacArthur, Ian


Cordeaux, Lt.-Col. J. K.
Harvey, Sir Arthur Vere (Macclesf'd)
McLaren, Martin


Corfield, F. V.
Harvie Anderson, Miss
Maclay, Rt. Hon. John


Costain, A. P.
Hastings, Stephen
MacLeod, John (Ross &amp; Cromarty)


Coulson, J. M.
Heald, Rt. Hon. Sir Lionel
McMaster, Stanley R.


Craddock, Sir Beresford
Henderson, John (Cathcart)
Macmillan, Maurice (Halifax)


Critchley, Julian
Henderson-Stewart, Sir James
Maddan, Martin







Maginnis, John E.
Profumo, Rt. Hon. John
Thomas, Leslie (Canterbury)


Markham, Major Sir Frank
Proudfoot, Wilfred
Thomas, Peter (Conway)


Marlowe, Anthony
Pym, Francis
Thompson, Kenneth (Walton)


Marshall, Douglas
Quennell, Miss J. M.
Thompson, Richard (Croydon, S.)


Mawby, Ray
Ramsden, James
Thornton-Kemsley, Sir Colin


Maxwell-Hyslop, R. J.
Rawlinson, Peter
Tiley, Arthur (Bradford, W.)


Mills, Stratton
Redmayne, Rt. Hon. Martin
Turner, Colin


Montgomery, Fergus
Roes, Hugh
Turton, Rt. Hon. R. H.


More, Jasper (Ludlow)
Rees-Davies, W. R.
van Straubenzee, W. R.


Morrison, John
Renton, David
Vaughan-Morgan, Rt. Hon. Sir John


Nabarro, Gerald
Ridsdale, Julian
Vickers, Miss Jean


Nicholson, Sir Godfrey
Roberts, Sir Peter (Heeley)
Vosper, Rt. Hon. Dennis


Noble, Michael
Ropner, Col. Sir Leonard
Wakefield, Edward (Derbyshire, W.)


Nugent, Sir Richard
Russell, Ronald
Walder, David


Oakshott, Sir Hendrie
Seymour, Leslie
Walker, Peter


Orr-Ewing, C. Ian
Shaw, M.
Walker-Smith, Rt. Hon. Sir Derek


Osborn, John (Hallam)
Shepherd, William
Ward, Dame Irene


Osborne, Sir Cyril (Louth)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)
Webster, David


Page, John (Harrow, West)
Smithers, Peter
Williams, Dudley (Exeter)


Page, Graham (Crosby)
Spearman, Sir Alexander
Williams, Paul (Sunderland, S.)


Pannell, Norman (Kirkdale)
Speir, Rupert
Wide, Sir Gerald (Bridgwater)


Partridge, E.
Stevens, Geoffrey
Wilson, Geoffrey (Truro)


Pearson, Frank (Clitheroe)
Steward, Harold (Stockport, S.)
Wise, A. R.


Peel, John
Stodart, J. A.
Wolrige-Cordon, Patrick


Percival, Ian
Stoddart-Scott, Col. Sir Malcolm
Woodhouse, C. M.


Peyton, John
Studholme, Sir Henry
Woodnutt, Mark


Pickthorn, Sir Kenneth
Summers, Sir Spencer (Aylesbury)
Worsley, Marcus


Pilkington, Sir Richard
Talbot, John E.
Yates, William (The Wrekin)


Pitt, Miss Edith
Tapsell, Peter



Pott, Percivall
Taylor, Sir Charles (Eastbourne)
TELLERS FOR THE NOES:


Powell, Rt. Hon. J. Enoch
Taylor, Edwin (Bolton, E.)
Mr. Chichester-Clark and


Price, David (Eastleigh)
Teeling, William
Mr. Whitelaw.


Prior, J. M. L.
Thatcher, Mrs. Margaret

New Clause.—(EXEMPTION FROM EXCISE DUTY OF SCOTTISH SHALE OIL.)

(1) On and after the third day of August, nineteen hundred and sixty-one, hydrocarbon oil produced from shale mined in Scotland shall be exempted from excise duty, and accordingly, on and after that date section two of the Finance Act, 1950 (which imposes a duty on hydrocarbon oils), shall have effect with the addition at the end of subsection (2) of that section of the following words, that is to say,
or
(c) to oils produced from shale mined in Scotland".

(2) The powers of the Commissioners of Customs and Excise to make regulations under section one hundred and ninety-eight of the Customs and Excise Act, 1952 (which empowers those Commissioners to make regulations relating to hydrocarbon oils), shall include power to make such regulations as appear to the Commissioners to be required to give effect to the last foregoing subsection.

(3) Where excise duty has been charged before or after the passing of this Act, and by virtue of this section no such duty should have been charged, or the duty should have been charged at the lower rate than that at which it was in fact charged, the person by whom the duty was paid shall be entitled to repayment of the amount of the overcharge.—[Mr. J. Taylor.]

Brought up, and read the First time.

Mr. John Taylor: I beg to move, That the Clause be read a Second time.
To me, there is something ironic in that form of words in this Motion. I

think I must have moved this Motion about ten times, and, therefore, I do not think that it is necessary for me to go over the details of the case again tonight. It is already well known to the Treasury and to Finance Bill addicts.
All I need say is that this new Clause seeks to free from duty oil produced from shale mined in Britain's only shale oilfields in the Lothians, in my constituency and that of my hon. Friend the Member for Midlothian (Mr. J. Hill). The reason that it seeks to do this is because it is a special industry, producing a special commodity in a special way, and deserves special consideration. Further, it is not possible to produce oil from shale in Britain at a cheaper cost than that of imported oil. Oil produced from shale must be sold at the same price as imported oil. Again, every other shale oil producing country in the world is encouraging the production of shale oil, and even in many cases subsidising it. In Britain, we tax it.
A further reason is because the industry is being steadily strangled by the duty. There are many other very cogent reasons, but these will suffice as an outline of the reason why we are again making this attempt to secure its remission.
When my hon. Friends and myself first advocated this total remission of the duty, the industry employed 5,000 employees. At its heyday, 100 years ago,


it employed 12,000 people, and even less than 100 years ago. Ten years ago, it employed 5,000, and today the labour strength of the industry is less than 2,000. More than 3,000 of its people have lost their jobs through the successive refusals of the Chancellor's predecessors, and a part of the industry has closed down. A very considerable proportion of the redundant workers are men over 50, and many of them are well-known to me. For them, redundancy is not merely a pause between two jobs. It is not an opportunity for a fortnight's holiday on the Income Tax rebate. For them, it is an industrial death sentence, particularly in an area of under-employment.
The story of this industry over the last ten years is a shocking story—a story of the industrial homicide of a good and valuable industry, slowly and painfully murdered by a stubborn, stiff-necked and stupid Treasury brief. However, I venture the prophesy that this time, the monotonous ghoulishness of that brief will be varied to some extent. Probably, we will have a new paragraph or two added to it, and we will be told that even if this Clause were accepted it could not be operated because of the European Free Trade Association commitment—because the Stockholm Treaty prevents fiscal fluctuations.
What my hon. Friends and myself would like to know is what have fiscal adjustments to do with shale oil? We are not proposing to sell shale oil to Sweden, Norway, or Denmark. We can do with all that we can get of it in Scotland. Sweden, which has its own growing and Government-encouraged shale oil industry, is not proposing to export any shale oil to Britain. They can do with all they can get in Sweden. We want to know what sort of crazy agreement this is and what sort of crazy argument it is. Do the Government visualise fleets of tankers sailing up the Firth of Forth loaded to the Plimsoll line with Swedish shale oil? The proposition has only to be stated for it to be shown how ridiculous it is.
The Swedes are reasonable people, with a reasonable Labour Government. They have not the slightest intention of damaging an industry of this nature, any more than we have of damaging their own shale oil industry. There is not the slightest doubt that they would at once

agree to an adjustment of that agreement in a case of this kind, where any such adjustment could not possibly affect British-Swedish trade. If the Government do not feel capable of negotiating such an adjustment, I will willingly volunteer to do it for them. I think that it could be done in a ten-minute talk with Gunnar Lange, and that I could produce a result in less than ten minutes.
The E.F.T.A. excuse is nothing more than an excuse. It is not an unsurmountable obstacle. If and when we go into the Common Market I hope that we will send better negotiators to Rome, or wherever it is, than we did to Stockholm. Two of Scotland's traditional industries, which operate in my constituency and that of my hon. Friend the Member for Midlothian—paper-making and shale oil—have no reason to thank that Treaty; very much to the contrary.
8.0 p.m.
When we have debated a similar Clause in the past, Chancellors of the Exchequer and Financial and Economic Secretaries to the Treasury—a long procession of them—have stood at the Box and have said, in effect, that the industry is uneconomic and expendable and, therefore, must die. Some have said it less bluntly than others. The last Chancellor of the Exchequer had the decency and the grace to look ashamed of himself as he stood at the Dispatch Box and stumbled through a brief which had neither logic nor justice to commend it.
It was patent that the Chancellor did not like his brief. Nevertheless, he stumbled through it. The present Minister of Health, when a Treasury Minister, made a vague promise, in reply to the debate four or five years ago, that there were other than fiscal ways of helping the industry. We waited with great expectation for a year, but nothing happened in any other way and another part of the industry died and ceased to function.
The most cynically brutal of all that long procession of replies was one made by the present Financial Secretary to the Treasury. I am sure that the Economic Secretary, who will reply tonight, will do so with his characteristic kindness, but, nevertheless, it will be the same kind of answer. In a previous incarnation at the Treasury, his colleague was both brutal and cynical in rejecting our proposal.


He is back at the old stand again, having miraculously survived after, in my view, a somewhat disastrous record. He has even been talked of as having yet another incarnation in another Ministry within a few days.
I have a vivid recollection of the Financial Secretary's speech that night. I remember the feeling of sick disappointment and dismay with which I listened to the brutal way in which he said, in effect, that the industry had no future, and that the sooner it went the better. I have a still more vivid memory of the distress and dismay which that speech caused to the families in the shale field.
An hon. Member whose first concern is the interest and welfare of his constituents does not look at things from the point of view of figures so much as from the viewpoint of the human material that is involved. It was a sad experience to find men in their 50s being made redundant and discharged with no hope of other work and their families suffering as a consequence. Therefore, clinging desperately to hope, I offer the Economic Secretary this opportunity to retrieve his hon. Friend from the disgusted ignominy in which he is held by many of my constituents who have served the industry and their country well and who deserve this honourable concession to a valuable, proud and pioneer industry.

Mr. J. Hill: As the Member referred to by my hon. Friend the Member for West Lothian (Mr. J. Taylor), and as a large proportion of this industry is situated in my constituency, I support the new Clause. Unike my hon. Friend, this is only the second occasion that I have come with a begging bowl to the Chancellor of the Exchequer asking assistance for this industry. I cannot understand the attitude of the Treasury towards this industry if those in that Department really consider what it does for the country, despite their claim that it is dying. If the industry is allowed to die, the country will require to import 5,000 tons of paraffin wax which is produced by the shale industry. Obtaining that wax will cost the country valuable dollars that we can least afford at a time when our trade gap is so wide.
Not only does the industry produce wax; it produces many of the detergents that are so widely advertised on television

and publicised in the newspapers. It produces one of the products that makes white "whiter than white", as we are told on television. It supplies four-fifths of the diesel oil used by Scottish transport, whose operators welcome it because it is a better oil than the imported oil. My authority for this is the operators of some of the buses who use the oil in Scotland.
The industry also produces or helps to produce many bricks from the residue. These bricks help the building industry in Scotland and they, too, are badly needed. Ninety-eight per cent. of the product of this industry is of some use and only 2 per cent. is waste. If the Government cannot see their way to help the industry at this stage, it will die within a very short time.
I read the speech of the former Chancellor of the Exchequer when he said that had he allowed his heart instead of his head to rule him, he would have removed the tax. We have been told of difficulties concerning E.F.T.A. My constituency has nothing for which to thank E.F.T.A. Not only is shale oil feeling the brunt of what is happening but the paper industry, another basic industry of the area, is suffering also. We are told that under the agreement the Government are not allowed to remove the tax or to assist the industry in that fashion. My information is that the shale-producing industries of Norway and Sweden are given assistance. Why cannot our Government help us? This industry, the only one of its kind in the country, has been slowly dying for some years.
My hon. Friend the Member for West Lothian and I met the Economic Secretary to ask for the tax to be removed. The hon. Gentleman told us that where the tax could not be removed the Government were considering other ways of helping the industry. I do not care how the Government help the industry as long as they do something for it and allow it to stay alive. The best method of doing this would be to remove the tax.
I have many friends among the miners in the shale industry. When the Local Employment Bill was being debated, I met the Secretary of State for Scotland at St. Andrew's House and put to him the point that many of the men from this industry would not be easy to absorb


in other industries. We have been asking for alternative industry to be allocated to the area, which at one time was scheduled and later was removed from the schedule. I know that the British Motor Corporation is building a factory at Bathgate. It seems to me that the Government are of opinion that that factory will solve the unemployment question in that part of Scotland. I wish that I could agree with them.
Like my hon. Friend the Member far West Lothian, I find it tragic to go around the shale areas and see villages that once were alive and thriving slowly dying. These proud people have nothing but despair in their hearts because of the attitude of the Treasury to the industry. I wish that some of the occupants of the Government front bench would go there, as did the Minister of Power recently. I am glad that the right hon. Gentleman had a talk with the secretary of the Shale Miners Union because I am sure that that gentleman would be only too willing to give the Minister, and anyone else, all the facts about the industry. I hope that the Minister of Power will use his not inconsiderable influence with the Chancellor to help us to get this tax removed.
When one visits these villages—such as Oakbank and Addiewell—and sees them dying just because this industry is being allowed to die, one is led even more to hope that the Government, and particularly the Chancellor, will think again on this question and will indicate what alternative help they can give to enable this industry to survive.
I hope that all hon. Members will support my hon. Friends and me in this Clause. We are not asking for millions of pounds. After all, it will cost the Treasury only about £600,000 a year. On the other hand, if the Government allow the industry to die it will cost them very much more, especially in unemployment and similar benefits. I urge the Chancellor to help to keep this industry in being, and the best way he can help is by removing this tax.

Dr. Alan Thompson: The main points have already been admirably covered by my hon. Friends the Member for West Lothian (Mr. J. Taylor) and the hon. Member for Midlothian (Mr. J. Hill) and there

remains little for me to say, although I must make one or two points in support of the arguments they adduced.
There are two categories of people who stand to gain by our proposal. The first are the consumers of the products of the Scottish shale industry. The second are the producers within the industry. Both, I claim, are important. The industry produces about 18 million gallons of diesel oil and supplies about four-fifths of the fuel requirements of Scotland's public transport. This is high-quality diesel oil and claims for its high quality have been stated at various times by the Scottish motor trade, the Falmouth Sub-Committee of the Ministry of Power, and the Institute of Petroleum Technologists. They have all agreed that Scottish shale is the perfect basis for diesel oil and, in view of the statements of those organisations, I need hardly add my comments in support of the quality of this Scottish product.
My hon. Friends have already referred to the production of paraffin wax—5,000 tons of which annually serves a wide range of industries, including the match industry, cosmetics, insulation for the electrical industry—which saves us about 1 million dollars a year.
It is said that if an industry collapses the consumers can, with difficulty, adjust themselves, perhaps by obtaining lower grade products elsewhere. But when we consider the producers and the men employed in the shale industry, we face a very different and serious problem. As has been pointed out, the number of men employed in the Scottish shale industry has been falling steadily over the years; from 5,000 to 3,000, and the latest figure is about 2,000. Heaven knows how many will be employed by the time we have our next debate on this subject.
It is further argued that the dismissed workers can go elsewhere. But hon. Gentlemen opposite seem to have strange nineteenth century ideas about the mobility of labour. They seem to think that if one closes an industry down the men, regardless of age, skills, and so on, simply move elsewhere. Actually, of course, they know very little about the mobility of labour in general and the problems of Scotland in particular.
They know nothing of these small Scottish communities dependent on


traditional industries, such as coal and shale. The economic consequences that strike these industries cause highly local problems and, in these highly sensitive areas, create a great impact. It might be said that Scotland has been too long dependent on these traditional industries and that new light industries should be brought in. No one denies that. Let us, by all means, invite new industries to Scotland—but is it unreasonable to suggest that, in this quest for new industries, we should now take the first steps to help an industry that is already in possession of vast natural resources?
8.15 p.m.
The Scottish shale industry has the best possible reasons for being where it is, for its resources are there, below the ground. The last estimate of resources reveals that 450 million tons still remains untapped in the areas covered by my hon. Friend's constituencies. It is an industry which already has the manpower, skill and techniques, which have been laboriously acquired over many generations. It is, further, rich in capital equipment, although much of it is being dismantled even now, at a time of unemployment. It seems ironical that at a time when the Government wish to bring new industries to Scotland, equipment of this type should be dismantled in order to save the Treasury £600,000 a year.
We are told that to help this industry would be uneconomic and would infringe the pure financial principles of the Treasury. But what about the whole range of tax relief and subsidies, based on all kinds of criteria, and some based on no criteria at all, that are being paid?
There are three major considerations that govern our decisions on tax reliefs and subsidies. Firstly, on defence, we encourage some industries which may be helpful if overseas supplies are cut off. Diesel oil falls into this category, as the Falmouth Sub-Committee pointed out. There is, secondly, the Government's desire to maintain full employment. It is admitted that relief should be given or subsidies provided to industries in order to maintain employment. The shale oil industry equally falls into this category. Thirdly, some industries get subsidies and tax reliefs because of powerful pressure groups. The shale

industry, however, can claim no more than the eloquence of the hon. Members who represent their areas. The industry has no access to the inner sanctum of the Treasury.
We have, recently, had relief in Stamp Duty costing £1½ million given to City magnates so that they need not continue to stick on stamps.

Mr. E. G. Willis: Would my hon. Friend not agree that the Secretary of State for Scotland should be a pressure group himself in this respect? After all, it is his job.

Dr. Thompson: I am coming to the Secretary of State in a moment. The shale industry is, of course, hampered in not having an effective pressure group, such as that possessed by big business and other industrial interests, by the distance from London of the shale oilfields. But the Secretary of State, of course, cannot claim this alibi. He sits in an office—when he is there—in St. Andrew's House not more than twelve miles from these villages which are falling into economic decline.
We could hardly have expected previous Chancellors, who knew little about Scotland—and I have a suspicion that the former Chancellor was not clear whether Midlothian lay north or south of Inverness—to have much insight into the problems of Scottish shale oil. But the present Chancellor went to a Midlothian school.

Mr. Willis: It was the wrong school.

Dr. Thompson: Perhaps. If it is not immodest of me to quote words previously used by me, I should like to quote from something I wrote in the Scotsman:
Since James Young started operations near Bathgate in 1851 the Scottish shale industry has undergone many changes. Originally designed to provide oil for lamps it now serves a wide range of industries. It has survived several economic crises, and has been a useful source of revenue for the Government. It has served as a model for shale industries throughout the world. American, Australian and European scientists who have never visited the Lothians in their lives speak familiarly of the 'Pumpherston' retort, the 'Broxburn' retort and the 'Philpstoun' retort. It remains to be seen whether these small communities in the Lothians still have more to give to the world's shale oil industry than their names.
By granting what we are asking the Government will not be opening the door

 
to vast losses by the Exchequer. They will not be opening the door to losses spread over a nation-wide industry. The Scottish shale industry is so local that it is more like helping a firm than an industry. It is more regional in its impact than nation-wide. Because of this, I consider that the Chancellor should use a little discretion and give this matter the attention it deserves and grant the request that we are making today.

Mr. Barber: The problem which is raised in this proposed new Clause and to which three hon. Members representing Scottish constituencies have spoken—

Mr. William Ross: Three, so far.

Mr. Barber: I take the hon. Gentleman's point. I should have thought that if he had intended to speak he would have done so, so that I could judge his points.

Mr. E. G. Willis: My hon, Friend the Member for Kilmarnock (Mr. Ross) wants to deal with the Economic Secretary's points when he has heard them.

Mr. Barber: This is an important matter, particularly to those hon. Members who represent this area. I was about to say that this is a matter which it is right that the Committee should consider with great care, although there are economic considerations which every hon. Member, including those who are closely concerned with the constituencies affected, will agree are highly relevant, and there is also the effect of the Stockholm Convention, by which we must abide.
Nobody who has given any thought whatever to the situation and prospects of the Scottish shale oil industry can be unaware of the intensely human and social aspects which have been mentioned in the debate. Perhaps I might say that it is not least because of these considerations that my right hon. Friend the Secretary of State for Scotland and my hon. Friend the Joint Under-Secretary of State are here to listen to this debate.
The dutiable products of Scottish shale oil are mainly either light hydrocarbon oil or heavy hydrocarbon oil

which is used as road vehicle fuel—derv. These are at present liable to a duty of 1s. 3d. per gallon together with other indigenous oils of the same character, whereas imported oils pay twice that amount of duty, namely, 2s. 6d. a gallon. There is at present a preference of 1s. 3d. a gallon, and this Clause would exempt altogether the dutiable products of Scottish shale oil from the hydrocarbon oil duty.
It is well known and accepted, I think, by all that the shale oil industry has for several years been in serious financial straits and cannot now compete on anything like equal terms with imported oils because the costs of shale mining and processing are relatively so high. It has been kept going by the duty preference accorded to the oil products which come from the Scottish shale oil industry—the preference over oils of imported origin. Since 1928—I think that this is a fact of considerable importance which the Committee must bear in mind—when the present duty on imported oils was first imposed at the rate of 4d. a gallon, this preference has been worth a total of about £21 million to the industry.

Mr. Willis: We have had all this before.

Mr. Barber: It is no good the hon. Gentleman saying that he has had all this before. Some of the arguments which have been put quite moderately by his hon. Friends, to which I listened without any interruption, have also been put before. But as we are considering this matter it is relevant to consider all the factors, and I think that the Committee must take into account the fact that since 1928 the preference has been worth about £21 million, and that is not a figure which the industry can just ignore and say that it was dealt with last year.
While the hon. Member for West Lothian (Mr. J. Taylor) may think that it is wrong to say that the industry is assisted in any way because it is taxed and is not subsidised, the fact is that although the industry pays the tax to the Exchequer the cost of the tax does not fall finally upon the industry because it collects the money from the public who buy the derv and motor spirit at prices which reflect a Customs duty of 2s. 6d. a gallon on similar imported oils.


Consequently, whereas the petroleum industry sells derv from imported oils at, say, 3s. 11d. a gallon and keeps 1s. 5d., the shale oil sells at the same price and the industry keeps 2s. 8d.

Mr. J. Taylor: The hon. Gentleman has argued that the value of the preference given to the industry over a period of years has amounted to £21 million. He also said that the industry paid only half the amount of duty paid by imported hydrocarbon oil. Does not that mean that the industry has contributed to the Exchequer in the same period £21 million? Is not that a consideration which might be borne in mind?

Mr. Barber: All I would say is that if the shale oil industry had not been in existence and we had imported all our oils, the Exchequer would have been better off to the extent of £21 million. It is undeniable that the industry is assisted by the duty structure, and is assisted at the expense of the Exchequer. Indeed, to suggest otherwise is not to consider the matter objectively, for it is precisely because the duty structure has been such an enormous help to the industry that it is now sought by this proposed Clause to provide even greater protection.

Mr. A. Woodburn: Since the country has made this enormous sacrifice over the years to keep this industry in existence, is it not a shame that all this is going for nothing and we are going to allow it to die?

Mr. Barber: I am surprised at the right hon. Gentleman, with his knowledge of these matters. I imagine that he had this matter to consider when he was Secretary of State for Scotland. It is very odd if he does not appreciate that this has been a real help to the industry.
However, one has to consider the position as it is today and I hope in a few moments to give some figures relative to the situation in 1960. As to what I call the human and social aspects, by far the most important consideration is the effect of the contraction of employment which was raised specifically by the hon. Member for Dunfermline Burghs (Dr. A. Thompson). I suppose that those who have looked into this side of the problem will know that when production was at its peak in about 1913,

this industry employed 10,000 people. By 1925, the number had fallen to 7,000. By 1928, a Customs duty on imported light oils was imposed, and by 1935 that duty was extended to derv.
Both these measures gave to indigenous oils, including the shale oil industry, a considerable advantage over imported oils. But even so, they did no more than slow down the decline. The consequence was that shortly after the last war the number employed had dropped to about 4,000. There was a further contraction in 1955–56 which reduced it to 3,000 and in 1958 to 2,300. As one hon. Member has already said, it is now less than 2,000. Certainly, the present contraction which is going on will reduce it to about 1,850.
That is one side of the picture, but there is another. The shale oil mining area was scheduled as a development district under the Local Employment Act because of its high level of unemployment, and there are now—nobody, I think, will deny this—many new jobs in prospect in the area. Of course, I entirely accept the point made by the hon. Member for Dunfermline Burghs that there will be some people—I have in mind particularly some of the older miners—who will find it very difficult to change over to new jobs, even though the jobs may be available in the same area, and I certainly would not want to suggest that there will not be difficulties of that kind.

Mr. J. Hill: Would the hon. Gentleman not agree that since the area was scheduled his right hon. Friend the President of the Board of Trade has de-scheduled it because this factory is being constructed at Bathgate?

8.30 p.m.

Mr. Barber: I was coming on to that very point. I can inform the Committee that the majority of the new jobs will, of course, be provided by the new B.M.C. factory at Bathgate which is now being constructed, and should begin to provide some employment in September of this year and should employ, I am informed, over 5,000 people by the middle of 1963. There will also be substantial new employment opportunities resulting from the Government's policy of providing work for the area. As the hon. Member for Midlothian (Mr. J. Hill) rightly pointed out, as a result of


the undoubted improvements in the local prospects of employment further applications for assistance under the Local Employment Act are not at present being accepted.
If, contrary to all our expectations, high unemployment should recur, my right hon. Friend the President of the Board of Trade has assured me—I have been in touch only this morning on this point—that he will certainly be ready to consider further applications for assistance under the Local Employment Act. [HON. MEMBERS: "Descheduled."] The area has been descheduled, yes; because employment prospects in the area, as everybody will agree, despite the very real difficulties mentioned by the hon. Gentleman about certain categories of persons, are good. The prospects are good at the moment, but if our expectations do not turn out as we hope, then, as I have said, my right hon. Friend will most certainly reconsider the position.
When I spoke on this matter on the Finance Bill of last year I dealt at some length with what I may call the purely economic considerations. I do not propose to go over the whole of that ground again, although it is very relevant. I do not propose to do so because what I said then still stands, but there really can be no doubt whatever that this industry is uneconomic. Indeed, that is why it is, naturally, asking for this additional protection.
However, I should like, briefly, as I anticipated a few minutes ago, to bring the facts up to date. The amount of derv and light oils obtained from shale last year was about 37,400 tons; roughly, 10 million gallons. That was the equivalent of a little more than one-third of 1 per cent. of the total quantity of derv and light oils used in the United Kingdom; less than one-eleventh of 1 per cent. of the total quantity of all hydrocarbon oils used in the United Kingdom.
I am not saying that, because this industry is small, that is a reason for not assisting it by way of duty protection or any other way. What I am saying is that, bearing in mind these facts, one has to face up to the further fact that the industry lost about £225,000 last year in spite of the benefit, whether we call it help or assistance or whatever, of £650,000 which was obtained from the duty preference. Whatever the views

of hon. Members may be as to how this problem ought to be dealt with, it cannot, I think, seriously be contended that the industry is an economic proposition.
I now want to turn to the other objection to this Clause, which was mentioned by the hon. Member for West Lothian, which makes it impossible to advise the Committee to accept it. At present, the light oils and derv produced from shale oil enjoy preference of 1s. 3d. a gallon over imported oils including oils of E.F.T.A. origin. This Clause, by exempting the shale oil from excess duty, would increase the preference to half a crown, and that would be, as hon. Gentlemen know, I think, a direct breach of the Stockholm Convention, which in effect, prohibits any increase in the protection of a domestic product against E.F.T.A. products over those existing on 1st January, 1960.
The hon. Member for West Lothian referred to the position of Sweden. I would only make two points about Sweden. First, the hon. Member said that he was sure that some arrangement could be reached with Sweden whereby this oil was excluded from the operation of the Stockholm Convention. I can assure him that shale oil was one of the matters which those who negotiated the Stockholm Convention had in mind but, as he will know, because I have discussed the Convention with him, Article 6 covers all industrial products with no exception.
The hon. Member thought that the shale oil which might be imported into this country would not come from any E.F.T.A. country. But it might well be produced outside the European Free Trade Association area but imported by one E.F.T.A. country, processed there, and the refined oil shipped into this country. One cannot ignore the possibility of shale oil coming from some other country into an E.F.T.A. country and being refined there.
There is one point of particular relevance to which I should like to draw the attention of the hon. Member. I inquired specifically about the Swedish industry, because the hon. Member was good enough to raise it with me when he and his hon. Friends came to see me last December. I am told that there is at present partial exemption from Excise duty given by the Swedes in respect of the Swedish shale oil industry, but that


exemption will have have to be abolished under the E.F.T.A. Agreement.
Last December, I discussed with the hon. Member for West Lothian and the hon. Member for Mid-Lothian the position arising from our obligation to eliminate all protective margins of preference by 1965. We are considering at present whether some other form of assistance should be given to the industry. My right hon. and learned Friend is in touch with the other Ministers concerned and is treating this as a matter of urgency so that the industry and those who work in it may know where they stand and can plan accordingly.

Mr. H. Wilson: Does the hon. Gentleman recall that his then right hon. Friend, now the noble Lord, Lord Amory, gave exactly the same pledge three years ago?

Mr. Barber: I think that the right hon. Gentleman has misunderstood me. I was talking about our obligation to eliminate the protective element in this Revenue duty and it was in that connection that I was saying that we were considering whether some other form of assistance should be given to the industry because we are precluded from increasing the preference. Indeed, we have to remove it altogether by 1965.

Mr. Willis: What assistance?

Mr. Barber: I am not in a position to say, and neither is anybody else, since we have not made up our minds about the form it might take, but I assure the hon. Member that it would not take the form of a fiscal advantage, because we are precluded from giving that.

Mr. H. Wilson: That is just the point. I have not misunderstood the hon. Gentleman at all. These words are only too painfully familiar. The then Chancellor said that that assistance could not be given for other, non-E.F.T.A. reasons, and that the Government were considering what other assistance could be given to the industry. Nothing has happened in the past three years. What reason have we to think that it will happen now? We have to make up our minds before a Division on the Clause is called in a few minutes.

Mr. Barber: I am sorry to disappoint the right hon. Gentleman, because I have already stated categorically

that this is a matter which my right hon. Friends have under urgent consideration at present.

Mr. Thomas Fraser: Three years!

Mr. Barber: With respect it is not three years. I am putting this forward as something which we are considering in connection with our obligation to eliminate the protective element in the Revenue duty, a matter which has arisen from an event during the last three years, namely the Stockholm Convention. It is in that connection that this consideration is taking place.
So that there shall be no misunderstanding, in view of what the right hon. Gentleman has said, I must make it absolutely clear that I can give no undertaking other than that we shall reach a conclusion just as fast as we possibly can and that my right hon. and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Secretary of State for Scotland will bear in mind all that has been said today. With that assurance, and bearing in mind that to accept the Clause would be in direct contravention of the Stockholm Convention which has been approved by this House, I hope that hon. Gentlemen opposite will not press the Clause.

Mr. James H. Hoy: The speech of the Economic Secretary was very disappointing. He said that he would not quote certain figures as part of his argument about whether this was one-third of 1 per cent. or some other infinitesimal fraction of our total oil needs, and then went on to use the figures, and they were exactly the same figures as he used last year. If one examines the columns of HANSARD, one will find not an iota of difference between the speech that he made last year and the one that he delivered tonight, though perhaps tonight's speech might be even a little worse.
I am a little surprised that the Economic Secretary, of all people, should say "You cannot go on subsidising this industry, because it makes losses and is not an economic unit". What nonsense it is. Did not the Treasury approve of a pay-out of millions of pounds to the cotton industry? Was that because it was an economic unit? Nothing of the kind.


The Treasury gives hundreds of millions of pounds per annum to the farming industry to keep it going. It is just about to make an interest-free contribution of millions of pounds towards the new Cunarder. One could quote example after example. Yet that is the argument that the Economic Secretary brings forward to prove that nothing should be done for the shale oil industry.
I was a little amused by the Economic Secretary's argument with regard to E.F.T.A. It is true that he was a little more specific than during last year's debate, when he had to admit in reply to an intervention by my right hon. Friend the Member for Huyton (Mr. H. Wilson) that the Government understood when they signed the E.F.T.A. agreement that they were doing this harm to the shale oil industry or else they did it in ignorance. But tonight the hon. Gentleman told us that the Government were well aware when they signed the E.F.T.A. agreement that they were signing the death warrant for the shale oil industry in the Lothians. That is quite different from what the hon. Gentleman said last year. If the Treasury knew when the agreement was being signed that it was doing this to the shale oil industry, the Committee and Scotland are entitled to know not from the Financial Secretary to the Treasury but from the Secretary of State for Scotland whether he agreed to the signing of the agreement knowing full well that it meant the finish of the shale oil industry. He cannot avoid collective responsibility as a member of the Cabinet.
8.45 p.m.
This is a serious problem, because, as this agreement begins to work itself out, more and more industries in Scotland will, I am certain, feel the draught. I do not want to belittle the Economic Secretary's statement that the Government are to seek some other way of helping the industry, but I remind him that this matter was raised two or three years ago, and that Lord Amory's promise was quoted in the recent debate on employment and industry in Scotland as a reminder to the Government. So far, however, nothing has been done. Indeed, we have lost Lord Amory, because he is so busy and has now disappeared to Canada where he finds it easier to maintain his

business than here. For some reason, he seems to find that difficult here in this country.
Lord Amory is the man who made the promise and so far nothing has been done. The Committee is entitled to know tonight something more specific. We know that, as a result of the unemployment figures, the President of the Board of Trade has been rather quick to take action, because he has descheduled the area, taking it out of the Local Employment Act in the hope that something will be provided in Bathgate for the people who will be unemployed.
It is not good enough for the Economic Secretary to say that, if this does not work out all right, the Government will take action. Why is it that always in Scotland we have to wait until unemployment is actually upon us before something is done? Why do not the Government take action to prevent such a situation arising? That would be good Government.
We want to know from the Secretary of State for Scotland what he proposes to do about this. The Economic Secretary's reply was terribly disappointing. It offered no hope to this valuable Scottish industry. Whether it is small or not, it is valuable and has made a considerable contribution over the years to the economic well-being of a very substantial community in Scotland. The Government offer no hope to them tonight, and I hope that, for the moment, the Government will remember that we are not dealing with one-third of 1 per cent. of oil production but with 18,500 men, their wives and families. That should be one of the strongest guiding points for the Government.
As my hon. Friend the Member for Midlothian (Mr. J. Hill) pointed out, we may spend considerably more in providing these people with unemployment benefit from which there will be no return. The case for the Clause has been made out and it can only be a matter of great regret to Scottish Members on this side of the Committee that the Government have not acceded to this modest request.

Mr. Willis: I thought that we would have had a word from some of the Government's Scottish supporters, but apparently the Scottish Tory Party is quite unconcerned about the death of


Scottish industries. The Secretary of State sits at the death bed of this industry and apparently enjoys it. This is a well-established Scottish industry, and I am astonished that he can sit on the Government Front Bench and be quite unconcerned while his hon. Friend the Economic Secretary pronounces the death sentence on it—because that is what his hon. Friend did.
We have heard all these arguments over and over again, and it seems hopeless to cover them once more, but we should say something about them. The first is that this industry has benefited by £21 million since 1928. In thirty-three years the industry has benefited by £21 million which has been spent so that people in the industry could have employment over that period. Surely their livelihoods and those of their families and the social capital in the villages which are now dying are worth the expenditure of less than £1 million a year, which is what it comes to.
In one Budget the Government have handed out £83 million to the Surtax payers, and yet they grudge £21 million to keep an industry alive for thirty-three years. What sense of proportion is this? What are the values on which the Government make their judgment? This is too rich.
The hon. Member says that the Government do not intend to do much for the district, but that if unemployment comes they will rush in and schedule it, In other words, if their medicine nearly kills the patient, they will send a doctor. But why nearly kill the patient in the first place? Surely that is a foolish thing to do. Why not have the doctor in to start with?
We have 5,000 jobs in the pipeline, says the hon. Member, but it is obvious that he does not know much about this magic pipeline in Scotland. It is a favourite example of the right hon. Gentleman the Secretary of State when he wants to tell us of the successes of Government policy. We always hear about what is in the pipeline. The trouble is that half of it falls out of the pipeline before it gets to the end.
Last July, I asked how many jobs would be provided for the Highlands in the year, and the answer was 700. I asked in January how many jobs had been provided and was told that the number was

400. In other words, half of them had fallen out in six months. That is the magic pipeline and that is why we do not pay much attention to it. We are interested in jobs and not in what is in the pipeline. A man cannot live on what is in the pipeline. That requires a better digestion than the hon. Member has.
The hon. Member then said that our proposal was uneconomic and he told us about the losses, but he did not complete the sum. Had he done so, he would have found that if the new Clause were accepted, the industry would be making about £400,000 a year. We are asking for about £600,000 and the industry is now losing about £250,000, so that if the Clause were accepted, the industry would be profiting to the extent of about £400,000 a year. One of the reasons why we moved the Clause was to put the industry on its feet so that the men in it could get a good living and so that the industry could develop and use one of the few raw materials which Scotland possesses in considerable quantity.
The hon. Gentleman gave us a lot of stuff about E.F.T.A. He told us that the Government were in the midst of negotiations and were hoping that some form of assistance would be given as a result of what would happen under the provisions of the Stockholm Agreement. He did not tell us what he is hoping to achieve by the arrangement which he is trying to make.
Is the hon. Gentleman trying to achieve a situation in which this industry will be kept going at its present level, or is he trying to achieve a position in which the gradual decline in the industry will continue so that by the time the agreement is made the industry will be dead and will not require that agreement? What are the provisions of the agreement? What are the Government trying to achieve? What is the attitude of the Government towards this industry? Do they want it to continue to develop? Do they want it to continue at its present level, or do they want it to continue to decline as it has done over the past ten years?
If the Government do not know the answer to those questions, it is not much use their trying to make any agreement with the E.F.T.A. countries. The Government must make up their mind before they enter into negotiations.

Mr. Barber: I did not say anything about negotiations. If the hon. Gentleman looks at what I said, he will realise that most of what he is saying is irrelevant. There are no negotiations.

Mr. Willis: Let us accept that there are no negotiations. The hon. Gentleman is to make some arrangement. I think he will agree that he is seeking to provide some other assistance.

Mr. Barber: Mr. Barber indicated assent.

Mr. Willis: The same questions apply. The Government cannot decide what assistance to give until they know the answer to the questions I asked. It is not such nonsense in any case. Whether there are to be negotiations, or whether there is to be assistance, the Government must first make up their mind about their attitude towards this industry. How can they decide what assistance to give if they do not know the level at which they wish to maintain the industry?
The hon. Gentleman made a considerable speech, most of which could have been scrapped, because it has been in HANSARD about nine times already. He could have said, "I do not want to cover that ground again", and devoted himself to replying to the questions about the Government's attitude towards this industry. That is a legitimate question to which we have had no answer. Do the Government aim at an industry stabilised at 2,000 employees; an industry capable of increasing its output; or an industry destined to continue to decline? It is not too much to ask for answers to those questions, and I hope that the hon. Gentleman will answer them tonight.

Mr. Woodburn: Last year, I asked some questions about this industry and made what I thought was a constructive suggestion. I suggested that as the Government were not prepared to continue to maintain the industry the British petroleum industry should be asked to agree to take over its maintenance and bear this trifling loss. As the hon. Gentleman showed, it is a mere bagatelle and would hardly be noticed in the tremendous output of the petroleum industry.
The hon. Gentleman nearly made our hearts bleed when he referred to the

sacrifice which the Treasury had made during all these years. He referred to the £21 million which the Treasury had spent over many years to keep this industry in existence. Is all this effort to be in vain? Is this terrible sacrifice to be in vain? Is the industry now to be allowed to decline for the sake of £250,000 a year?
I do not think that it depends on the Government. I think that it depends on the British petroleum industry. Has anybody discussed my suggestion with that industry? We ought to get the petroleum industry to agree to carry on this industry and not allow it to die.
9.0 p.m.
If the economics that the Government apply to this part of Scotland—these upland villages which are likely to die—were applied generally, many parts of the country would be rendered derelict and depopulated, and would go back to the wild. It is part of our social policy to see that homes are maintained, and that the people living in those homes get work. The Treasury should not have its economics in little water-tight compartments—or perhaps I ought to say oil-tight compartments. It should survey the whole field. It has a social responsibility for the houses that have been built in these areas. There are new houses that may never be occupied if the rest of the people go.
The villages will not have any industry, because they are in a part of the Pentlands where industry is not likely to develop. This means that another little part of Scotland will be rendered derelict—and all for the sake of £250,000 a year, even though the Treasury has made "great sacrifices" over the years. When I think of the money which has been thrown away as a result of mistakes in war, the idea that this £250,000 will ruin the country shocks me.
Incidentally, if war came this industry would be extremely valuable. It would provide us with at least 18 million gallons of oil, and my hon. Friend has said that there are 450 million tons in reserve. It would be wise to keep the industry ticking over, if only as an insurance that if difficulties occur in the oilfields in the rest of the world at least some oil will be produced in Britain.

Mr. E. C. Redhead: I enter this debate with some diffidence. I am the only speaker from this side of the Committee who can claim not to have a direct interest of a constituency character, or even of a Scottish character. Nevertheless, perhaps it is not inappropriate that I should make a few observations. I feel that I can at least take a detached view.
I listened to my hon. Friend the Member for West Lothian (Mr. J. Taylor) opening the debate on what might now be described as a hardy annual. I understand that this is about the seventh occasion on which my hon. Friend has tried to wrest this very small concession from the Treasury. Such experiences as that of my hon. Friend, year after year, in undertaking what has obviously become a vain quest, tends to lead advocates to lose heart and to give up, and to find their advocacy dulled in the process, but my hon. Friend argued his case with passion, forcefulness and strong conviction. That is evidence that the matter is one of deep and human concern in the affected areas.
I was disappointed in the reply of the Economic Secretary. In earlier debates he has brought a fresh mind to bear on problems which have been the subjects of discussion by the Committee, and on this occasion he did at least approach his brief with some recognition of the human aspects of the problem. Disappointingly, however, his brief was basically the same old, turgid repetition of arguments and figures that had been trotted out year after year on the subject. I hoped that he would have sent this brief back and said, "I, for one, as a new performer, want a new script. I want one which is a little more convincing to the Committee than this has proved to be in the past."
We are told that the preferential rates of duty in relation to the shale oil industry have helped that industry in the past, but a great deal of that argument has already been debunked by subsequent speeches. I am always a little surprised when the Treasury speaks of giving help as if it were actively paying out money, when all that is meant is that the Treasury is refraining from taking quite as much in the form of taxation as it would like to take. There is a difference. But whatever measure of help this has

given to the industry, it has not been sufficient.
There is nothing wrong in principle or morally in saying that if an industry, valued on other grounds, is uneconomic in present conditions, it should be relieved of some of the taxation burden placed upon it. Examples have been quoted showing how that principle has been accepted elsewhere in Budgetary fiscal policy. I take the view that whatever be the balance of argument about revenue, it is sheer economic folly to ignore the real value of the products of this industry and to allow capital equipment to be dismantled and wasted. Even more, I regret the tragic waste of the skill and techniques of the men employed in the industry. I put that aspect first in my consideration of the matter.
We are asking for a very small concession and one which it is not even suggested would be likely to lead to any widespread repercussions or involve the Chancellor in any difficulties or corresponding demands from other spheres of industry. We have had the E.F.T.A. argument adduced again. I do not think that presents an insurmountable problem. There was one subtle difference in the presentation of the E.F.T.A. argument on this occasion and I suspect that the Economic Secretary was induced, because of interruptions, to slip it into his brief.
One question arises to which there has been no reply. If this agreement were entered into with the knowledge which the Economic Secretary now says was possessed by the Government, clearly what was done was a deliberate and wanton sacrifice of this industry about which the Committee is entitled to an explanation.
I note the sympathy of the Government for those thrown out of work by the steady decline of employment in the industry and that they are prepared to invoke the Local Employment Act to provide new jobs in the area. The Economic Secretary had the grace to acknowledge that he appreciated the difficulties of the men who will be thrown on the labour market. But I do not think that the hon. Gentleman fully appreciates the nature of the problem of men who, as we have heard, are in their fifties. We cannot expect men who


have spent a lifetime in one job, and acquired the necessary skills and techniques and an attitude of mind to their job, readily to take up some new work—even though it may be brought into the area where they live—if that work requires totally new techniques to which they would find it difficult to adjust themselves.
We are not impressed by the suggestion that once again the Government are to consider some other form of assistance for this industry. After the stories that we have heard about what has happened before when that has been said and in the light of our experience of what has happened about former Government promises, we want something more specific than the vague assurances which we have heard before being dissuaded from our intention to divide the Committee on this issue.

Mr. Barber: I do not want after these seven years of debates to go over the ground again, but perhaps I might be permitted to deal with one or two points raised by the hon. Member for Walthamstow, West (Mr. Redhead) and others. The right hon. Member for Clackmannan and East Stirlingshire (Mr. A. Woodburn) will do me justice in agreeing that I did not concentrate on what one might call the purely economic aspects of this industry, but I thought it right to mention them because that is something which one must have in mind. Certainly no one who has discussed this matter with the hon. Member for West Lothian (Mr. J. Taylor) and the hon. Member for Midlothian (Mr. J. Hill)—.as I did, and also looked into it with great care and discussed it with the Chancellor—could ignor what the right hon. Member called the human aspects of the case. I assure the hon. Member for Walthamstow, West that when I referred to that aspect of the problem I was certainly not just paying lip service but meant every word I said.
The right hon. Member also asked about the views of the company. In connection with our obligation under the Stockholm Convention to remove the protective element of this duty, we have been in touch with the company. So far as anything the company has done or may do in future, that must remain a matter for British Petroleum. The

right hon. Member, I am sure, will agree that the Government have looked at the way in which British Petroleum and the wholly-owned subsidiary have behaved over the years. They have behaved as extremely good employers. It would certainly be quite wrong and out of keeping, despite our shareholding in the company, to bring pressure on it as to the way in which it should deal with the situation, although I have no doubt that it will take note of what the right hon. Member said.
The hon. Member for Edinburgh, Leith (Mr. Hoy) and one or two other hon. Members referred to the Stockholm Convention. I can only say to the Committee, as I said last year, that the Stockholm Convention was debated in this House. The European Free Trade Association Bill went through, I think, without a Division. One has only to glance at the Stockholm Convention, and in particular at the relevant article, Article VI, to see immediately the effect that this has on the protective element in any revenue duties. Obviously, one of the most important Revenue duties covered by Article VI must be the hydrocarbon oil duty. It must be apparent to anyone looking at this matter, it certainly was to the company—

Mr. Willis: Was it to the Government?

Mr. Barber: —and certainly to the Government, that the shale oil industry was included. The hon. Member for Edinburgh, East (Mr. Willis) continues to make these strange interjections which, not being a Scotsman, I do not quite follow.

Mr. Ross: Neither is my hon. Friend the Member for Edinburgh, East (Mr. Willis) a Scotsman.

Mr. Barber: The hon. Member for Edinburgh, East criticised what I said about the assistance, help, or whatever one likes to call it, which has been given to this industry and said that I did not complete the sum. I shall complete the sum. I said that the assistance which had been given, as he pointed out, over thirty-three years, amounted to £21 million. I point out that last year the company made a loss of £225,000 despite the duty advantage it got through the protection of £650,000. To complete the sum, I should point out what I think are two very significant facts. The assistance


duty advantage, or whatever we call it, was last year equivalent to £5 a week for each person employed in the industry or, to put it another way, equivalent to a protective duty of 125 per cent. Those are facts which one simply cannot ignore, but that is not to say that they are necessarily conclusive in deciding this matter.
9.15 p.m.
I cannot go any further than I have gone already about the consideration which we are giving to assistance for the future. This matter is now being considered. As it is being considered and as we have not reached a conclusion, I cannot—indeed, I am not prepared to—say any more than I have already. [Interruption.] If the hon. Member for Edinburgh, East is not satisfied, that is a matter for him. I repeat finally—I hope hon. Members opposite will bear this in mind—that if they support the Clause tonight they will take action which will be completely contrary to an agreement which we have made with our friends in E.F.T.A. and which was approved by the House of Commons without a Division.

Mr. H. Wilson: After sitting through so many of these debates and taking part in a number of them, the last thing I want to do is to prolong the agony much longer. For my hon. Friends it is an agony to have to hear our arguments turned down year after year by the hon. Gentleman.
I must ask him one question. He has stated as a reason why we should accept the Government's attitude the fact that some of his right hon. Friends are apparently getting together to consider some other form of aid to the industry. This does not fill us with any confidence whatsoever. He must tell the Committee on what lines the discussions are taking place. There is nothing new about them, because they started three years ago. The matter must have been considered then and was presumably turned down, because nothing happened. It was just thrown out during a debate and forgotten about afterwards. We take it from what the hon. Gentleman said that it is not fiscal assistance.

Mr. Barber: Mr. Barber indicated assent.

Mr. Wilson: We have got that out of the way. I will now see if we can make any further progress. I do not mind doing it on the twenty-question basis, if the hon. Gentleman wants to be childish. That is one question. We now know that it is not fiscal. Is it—could it be—that the hon. Gentleman intends to go back to our E.F.T.A. partners to renegotiate a codicil or addendum to the Stockholm Convention which would enable the Government to give some assistance? Could it be that? The hon. Gentleman is quiet.

Mr. Barber: Perhaps the right hon. Gentleman was out of the Chamber when I said that there was no question of negotiation. I repeat that there is no question of negotiating with our partners. There is no question of any fiscal advantage. All that we are doing is considering whether there is any way, apart from those two methods, of assisting the industry.

Mr. Wilson: It is quite clear that I have only eighteen questions left. This obviously suggests to any student of the present Government, after long experience of the Cunard affair and other things, that the hon. Gentleman or his right hon. Friends are contemplating some form of financial assistance. As he said that it is an uneconomic industry, it obviously will not be a loan, because the Government would not expect to get the money back, not even if they followed the usual procedure of lending it at low or even a negative rate of interest, Presumably they are considering some kind of subsidy.
It is no good looking at the Secretary of State for Scotland. He would be the last person to know about it. It is obviously some form of subsidy. If the Economic Secretary would rise and confirm this it would shorten the proceedings a little. He could deny it if he wished. We are obviously getting warm. I cannot understand why we must play this sort of game in a dull House of Commons just because the Economic Secretary refuses to grow up.
Assuming that it is financial assistance in that form—namely, by way of subsidy—will the Economic Secretary say


whether he is satisfied that this is also in accordance with the Stockholm Convention? It usually takes the Government about a year after the event to find out what the Stockholm Convention means. Is the Economic Secretary quite sure that there is not tucked away in the Convention a provision forbidding the kind of aid about which he is talking? I hope that he will give us an assurance on that. It would be a pity if, after having decided on financial assistance this year, he found next year that the Stockholm Convention forbids it. We know that we shall hear no more about this until next year's Finance Bill. That is perfectly certain.
Even if the Convention does not forbid it, what would be the position under the Common Market? We do not want to be told this year that the Government have found a way round the Stockholm Convention to enable assistance to be given, and then, on next year's Finance Bill, to be told that they cannot do it because of the Common Market, if by that time they have come to any decision about the Common Market. If the hon. Gentleman thinks that this entirely vague reference to some right hon. Gentlemen getting together to consider some form of aid for the industry will persuade us against going into the Division Lobby, he is quite wrong. I know that he is by now probably thinking "Oh, to heck with the lot of it; why do not they get into the Division Lobby and get it over?". That is probably what is going through his mind, but we are concerned with the welfare of the industry.
I am not going into all the arguments again, but we must ask the hon. Gentleman if he will not now come a little clean about the thoughts that are proceeding with such painful slowness through the mind of the Secretary of State for Scotland. Perhaps the Secretary of State will tell us. It may well be that the Economic Secretary is not privy to these great secrets of State. The Secretary of State for Scotland is obviously writing or doodling something. Is the word "subsidy" in it? Will he tell us what is happening? All we shall get at the end of today is a promise that the Secretary of State for Scotland will go to the Lothians and make a speech. They have suffered enough in this area.

Are we to have an answer from the Government on what kind of assistance is being considered? Is it compatible with the Stockholm Convention, and also with the Common Market?

Mr. Barber: In regard to the Common Market, that depends on what arrangements, if any, we make with the Common Market countries. In regard to the assurance I gave on urgent consideration of the possibility of assistance, I have already said that I cannot go any further than that, but I can inform the Committee that there is no doubt that we would not be precluded from giving some form of assistance by the Stockholm Convention, so long as it is not of a fiscal character.

Mr. T. Fraser: I do not want to prolong this debate unduly, but the hon. Gentleman has made clear that he is very concerned about the human aspect—the 2,000 workers in the industry. He has said and has repeated that consideration will be given to other ways of helping this industry. This is not the 60,000-dollar question, but the 2,000-worker question, to which we want an answer. What is the object of the exercise? Is the object of the exercise to maintain the industry at about its present level, that is, about 1,850 to 2,000 workers employed? Or is it to give new life to this industry, so that it may expand? Or is it the object of the exercise that the industry, now employing 2,000 workers, will take another three, four or five years to die completely? If the Minister could give this matter his attention and give us an answer to that question it would be very helpful, because it is important.
What is the aim, objective and point of the exercise? Is it to keep the industry at about its present level, to provide that there will be some expansion of the industry, or merely to provide some cushion so that the industry can die without too sudden an impact upon the area? Could the Minister answer those questions and tell us what the point and objective of the exercise is?

Mr. Barber: There really is not anything that I can usefully add to what I have said.

Hon. Members: Shocking.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 165, Noes 234.

Division No. 212.]
AYES
[9.25 p.m.


Ainsley, William
Hewitson, Capt. M.
Parkin, B. T.


Allaun, Frank (Salford, E.)
Hill, J. (Midlothian)
Pearson, Arthur (Pontypridd)


Allen, Scholefield (Crewe)
Hilton, A. V.
Pentland, Norman


Awbery, Stan
Holman, Percy
Popplewell, Ernest


Bacon, Mist Alice
Holt, Arthur
Prentice, R. E.


Baird, John
Houghton, Douglas
Price, J. T. (Westhoughton)


Baxter, William (Stirlingshire, W.)
Howell, Denis (Small Heath)
Probert, Arthur


Bence, Cyril
Hoy, James H.
Pursey, Cmdr. Harry


Benson, Sir George
Hughes, Emrys (S. Ayrshire)
Rankin, John


Blyton, William
Hughes, Hector (Aberdeen, N.)
Redhead, E. C.


Boardman, H.
Hunter, A. E.
Reid, William


Bowden, Herbert W. (Leics, S.W.)
Hynd, H. (Accrington)
Roberts, Albert (Normanton)


Boyden, James
Irvine, A. J. (Edge Hilt)
Roberts, Goronwy (Caernarvon)


Braddock, Mrs. E. M.
Irving, Sydney (Dartford)
Robertson, John (Paisley)


Brockway, A. Fenner
Janner, Sir Barnett
Robinson, Kenneth (St. Pancras, N.)


Broughton, Dr. A. D. D.
Jay, Rt. Hon. Douglas
Rogers, G. H. R. (Kensington, N.)


Brown, Rt. Hon. George (Belper)
Jones, Dan (Burnley)
Ross, William


Callaghan, James
Jones, J. Idwal (Wrexham)
Short, Edward


Chapman, Donald
Jones, T. W. (Merioneth)
Slater, Mrs. Harriet (Stoke, N.)


Chetwynd, George
Kelley, Richard
Slater, Joseph (Sedgefield)


Craddock, George (Bradford, S.)
Key, Rt. Hon. C. W.
Small, William


Cronin, John
King, Dr. Horace
Smith, Ellis (Stoke, S.)


Crosland, Anthony
Lawson, George
Snow, Julian


Crossman, R. H. S.
Lee, Frederick (Newton)
Soskice, Rt. Hon. Sir Frank


Cullen, Mrs. Alice
Lever, L. M. (Ardwick)
Spriggs, Leslie


Darling, George
Lewis, Arthur (West Ham, N.)
Steele, Thomas


Davies, Ifor (Gower)
Logan, David
Stewart, Michael (Fulham)


Davies, S. O. (Merthyr)
Mabon, Dr. J. Dickson
Stonehouse, John


Deer, George
MacColl, James
Stones, William


Diamond, John
McInnes, James
Stross, Dr. Barnett (Stoke-on-Trent, C.)


Dodds, Norman
McKay, John (Wallsend)
Sylvester, George


Donnelly, Desmond
Mackie, John (Enfield, East)
Symonds, J. B.


Dugdale, Rt. Hon. John
McLeavy, Frank
Taylor, Bernard (Mansfield)


Ede, Rt. Hon. C.
Mallalieu, J. P. W. (Huddersfield, E.)
Taylor, John (West Lothian)


Edelman, Maurice
Manuel, A. C.
Thompson, Dr. Alan (Dunfermline)


Edwards, Rt Hon. Ness (Caerphilly)
Mapp, Charles
Thomson, G. M. (Dundee, E.)


Edwards, Robert (Bilston)
Marquand, Rt. Hon. H. A.
Thornton, Ernest


Evans, Albert
Marsh, Richard
Timmons, John


Fitch, Alan
Mason, Roy
Tomney, Frank


Fletcher, Eric
Mellish, R. J.
Ungoed-Thomas, Sir Lynn


Foot, Michael (Ebbw Vale)
Millan, Bruce
Wade, Donald


Fraser, Thomas (Hamilton)
Milne, Edward J.
Wainwright, Edwin


Gordon Walker, Rt. Hon. P. C.
Mitchison, G. R.
Whitlock, William


Gourlay, Harry
Monslow, Walter
Wilcock, Group Capt. C. A. B.


Grey, Charles
Moody, A. S.
Wilkins, W. A.


Griffiths, David (Rother Valley)
Mort, D. L.
Willey, Frederick


Griffiths, Rt. Hon. James (Llanelly)
Moyle, Arthur
Williams, D. J. (Neath)


Grimond, J.
Mulley, Frederick
Willis, E. G. (Edinburgh, E.)


Hale, Leslie (Oldham, W.)
Neal, Harold
Wilson, Rt. Hon. Harold (Huyton)


Hall, Rt. Hn. Glenvil (Colne Valley)
Oliver, G. H.
Winterbottom, R. E.


Hamilton, William (West Fife)
Oram, A. E.
Woodburn, Rt. Hon. A.


Hannan, William
Oswald, Thomas
Woof, Robert


Hart, Mrs. Judith
Owen, Will
Yates, Victor (Ladywood)


Hayman, F. H.
Padley, W. E.



Henderson, Rt. Hn. Arthur (Rwly Regis)
Pannell, Charles (Leeds, W.)
TELLERS FOR THE AYES:


Herbison, Miss Margaret
Parker, John
Mr. Charles A. Howell and




Mr. McCann.




NOES


Agnew, Sir Peter
Boyle, Sir Edward
Cleaver, Leonard


Aitken, W. T.
Braine, Bernard
Cole, Norman


Allan, Robert (Paddington, S.)
Brewis, John
Cooper-Key, Sir Neill


Arbuthnot, John
Bromley-Davenport, Lt.-Col. Sir Walter
Cordeaux, Lt.-Col. J. K.


Atkins, Humphrey
Brooman-White, R.
Cordle, John


Balniel, Lord
Brown, Alan (Tottenham)
Corfield, F. V.


Barber, Anthony
Browne, Percy (Torrington)
Costain, A. P.


Barter, John
Bryan, Paul
Coulson, J. M.


Batsford, Brian
Buck, Antony
Craddock, Sir Beresford


Baxter, Sir Beverley (Southgate)
Bullus, Wing Commander Eric
Critchley, Julian


Beamish, Col. Sir Tufton
Burden, F. A.
Crosthwaite-Eyre, Col. Sir Oliver


Bell, Ronald
Campbell, Sir David (Belfast, S.)
Cunningham, Knox


Bennett, Dr. Reginald (Gos &amp; Fhm)
Campbell, Gordon (Moray &amp; Nairn)
Curran, Charles


Berkeley, Humphry
Carr, Compton (Barons Court)
Currie, G. B. H.


Bidgood, John C.
Carr, Robert (Mitcham)
Dalkeith, Earl of


Bishop, F. P.
Cary, Sir Robert
Dance, James


Black, Sir Cyril
Clark, Henry (Antrim, N.)
d'Avigdor-Goldsmid, Sir Henry


Bourne-Arton, A.
Clark, William (Nottingham, S.)
Deedes, W. F.


Box, Donald
Clarke, Brig. Terence (Portsmth, W.)
de Ferranti, Basil




Donaldson, cmdr. C. E. M.
Kerby, Capt. Henry
Rees, Hugh


du Cann, Edward
Kerr, Sir Hamilton
Rees-Davies, W. R.


Duncan, Sir James
Kirk, Peter
Renton, David


Eden, John
Lambton, Viscount
Ridsdale, Julian


Elliot, Capt. Walter (Carshalton)
Leburn, Gilmour
Roberts, Sir Peter (Heeley)


Elliott, R.W. (Nwcstle-upon-Tyne, N.)
Legge-Bourke, Sir Harry
Robinson, Sir Roland (Blackpool, S.)


Emery, Peter
Lewis, Kenneth (Rutland)
Ropner, Col. Sir Leonard


Errington, Sir Eric
Lindsay, Martin
Russell, Ronald


Farey-Jones, F. W.
Linstead, Sir Hugh
Shaw, M.


Farr, John
Litchfield, Capt. John
Shepherd, William


Finlay, Graeme
Lloyd, Rt. Hon. Selwyn (Wirral)
Smith, Dudley (Br'ntf'rd &amp; Chiswick)


Fisher, Nigel
Longden, Gilbert
Smithers, Peter


Fraser, Ian (Plymouth, Sutton)
Loveys, Waiter H.
Spearman, Sir Alexander


Freeth, Denzil
Lucas-Tooth, Sir Hugh
Speir, Rupert


Gammans, Lady
McAdden, Stephen
Stevens, Geoffrey


Gibson-Watt, David
MacArthur, Ian
Steward, Harold (Stockport, S.)


Glover, Sir Douglas
McLaren, Martin
Stodart, J. A.


Glyn, Dr. Alan (Clapham)
Maclay, Rt. Hon. John
Stoddart-Scott, Col. Sir Malcolm


Goodhart, Philip
Macleod, Rt. Hn. Iain (Enfield, W.)
Studholme, Sir Henry


Goodhew, Victor
McMaster, Stanley R.
Summers, Sir Spencer (Aylesbury)


Grant, Rt. Hon. William
Macmillan, Rt. Hn. Harold (Bromley)
Talbot, John E.


Grant-Ferris, Wg Cdr. R.
Macmillan, Maurice (Halifax)
Tapsell, Peter


Green, Alan
Macpherson, Niall (Dumfries)
Taylor, Sir Charles (Eastbourne)


Grimston, Sir Robert
Maginnis, John E.
Taylor, Edwin (Bolton, E.)


Grosvenor, Lt.-Col. R. G.
Markham, Major Sir Frank
Teeling, William


Gurden, Harold
Marshall, Douglas
Thatcher, Mrs. Margaret


Hall, John (Wycombe)
Mawby, Ray
Thomas, Leslie (Canterbury)


Hamilton, Michael (Wellingborough)
Maxwell-Hyslop, R. J.
Thomas, Peter (Conway)


Harris, Reader (Heston)
Mills, Stratton
Thompson, Kenneth (Walton)


Harrison, Brian (Maldon)
Montgomery, Fergus
Thompson, Richard (Croydon, S.)


Harrison, Col. Sir Harwood (Eye)
More, Jasper (Ludlow)
Thornton-Kemsley, Sir Colin


Harvey, Sir Arthur Vere (Macolesf'd)
Morrison, John
Tiley, Arthur (Bradford, W.)


Harvey, John (Walthamstow, E.)
Nabarro, Gerald
Turner, Colin


Harvie Anderson, Miss
Nicholson, Sir Godfrey
Turton, Rt. Hon. R. H.


Heald, Rt. Hon. Sir Lionel
Noble, Michael
van Straubenzee, W. R.


Henderson, John (Cathcart)
Nugent, Sir Richard
Vaughan-Morgan, Rt. Hon. Sir John


Henderson-Stewart, Sir James
Oakshott, Sir Hendrie
Vickers, Miss Joan


Hendry, Forbes
Orr-Ewing, C. Ian
Vosper, Rt. Hon. Dennis


Hiley, Joseph
Osborn, John (Hallam)
Wakefield, Edward (Derbyshire, W.)


Hill, Mrs. Eveline (Wythenshawe)
Osborne, Sir Cyril (Louth)
Walder, David


Hill, J. E. B. (S. Norfolk)
Page, John (Harrow, West)
Walker, Peter


Hirst, Geoffrey
Page, Graham (Crosby)
Walker-Smith, Rt. Hon. Sir Derek


Hocking, Philip N.
Pannell, Norman (Kirkdale)
Wall, Patrick


Holland, Philip
Partridge, E.
Ward, Dame Irene


Hollingworth, John
Peel, John
Webster, David


Hopkins, Alan
Percival, Ian
Whitelaw, William


Hornby, R. P.
Peyton, John
Williams, Dudley (Exeter)


Hornby-Smith, Rt. Hon. Patricia
Pickthorn, Sir Kenneth
Williams, Paul (Sunderland, S.)


Howard, John (Southampton, Test)
Pilkington, Sir Richard
Wills, Sir Gerald (Bridgwater)


Hughes Hallett, Vice-Admiral John
Pitt, Miss Edith
Wilson, Geoffrey (Truro)


Hughes-Young, Michael
Pott, Percivall
Wise, A. R.


Hurd, Sir Anthony
Powell, Rt. Hon. J. Enoch
Wolrige-Gordon, Patrick


Iremonger, T. L.
Price, David (Eastleigh)
Woodhouse, C. M.


Irvine, Bryant Godman (Rye)
Prior, J. M. L.
Woodnutt, Mark


Jackson, John
Proudfoot, Wilfred
Worsley, Marcus


James, David
Pym, Francis
Yates, William (The Wrekin)


Jenkins, Robert (Dulwich)
Quennell, Miss J. M.



Johnson, Eric (Blackley)
Ramsden, James
TELLERS FOR THE NOES:


Johnson Smith, Geoffrey
Rawlinson, Peter
Mr. Chichester Clark and


Jones, Rt. Hn. Aubrey (Hall Green)
Redmayne, Rt. Hon. Martin
Mr. F. Pearson.


Kaberry, Sir Donald

New Clause.—(ASSESSMENTS ON BODIES CORPORATE UNDER CASES I AND II OF SCHEDULE D.)

(1) The annual profits and gains arising or accruing to a body corporate and chargeable to tax under Case I or II of Schedule D on the full amount of the profits or gains of the year preceding the year of assessment shall, as from the fifth day of April, nineteen hundred and sixty-one, be charged on the full amount of the profits or gains of the year of assessment, so however that no such charge shall be greater than it would have been but for this section; and the provisions of Part V of the Act of 1952 shall be amended accordingly.

(2) The Commissioners of Inland Revenue shall make regulations providing for all matters arising out of subsection (1) of this section including

the collection of tax under provisional assessments calculated on the profits or gains of the year preceding the year of assessment.—[Mr. Diamond.]

Brought up, and read the First time.

Mr. John Diamond: I beg to move, That the Clause be read a Second time.

The Temporary Chairman: I hope that hon. Members will be a little more silent than they are at present, because we want to hear what the hon. Member for Gloucester (Mr. Diamond) has to say.

Mr. Emrys Hughes: Are we, with this Clause, to consider the Clause—(Liability of Sovereign to tax)—standing in my name?

The Temporary Chairman: No. We are considering this new Clause on its own.

Mr. Diamond: This new Clause is not likely to raise the passion which the last Clause evoked, nor indeed, the passion which the Clause which we are next to consider will evoke. But it is, I suggest, an extremely worth-while Clause and one which, although expressed in somewhat technical language, is simplicity itself.
I wish to strip it of all its technical verbiage and description and deal with it on a simple first principle basis. It is a Clause which seeks to put simplicity in the place of complexity in our taxing arrangements. It seeks Ito put relevance in the place of irrelevance, to put fair shares in taxation instead of unfair shares, to substitute justice where there is injustice. In addition to those qualities, it has the support of my right hon. and hon. Friends, of the Royal Commission and of the Institute of Chartered Accountants, and I am sure that it will commend itself both to the Committee and to the Government.
The Clause in the form in which it is drawn provides an alternative for taxing companies' trading profits. It is drawn in this way for a variety of reasons, not the least compelling of which is that it is in its present form in order, and it will be well understood that improvements will be welcome. I do not think I need say any more on that score.
Perhaps I should shortly describe the present method of assessment of companies' profits and the alternative provided by this Clause. The present method, as I am sure most hon. Members know, is that inasmuch as one does not know for certain what profits one is making until some time has elapsed and the accounts have been prepared, assessments are not based on the actual profits one earns, which is the natural and logical way of arriving at a tax liability and which is the way in which one arrives at one's tax liability if one is a salary earner, a Member of Parliament, a director of a company, a miner, a bus driver or whatever the case may be. They are based on the profits of a preceding year.
Inasmuch as the accounting year is the year in which businesses take out their accounts—and this may vary from business to business—the profits are not those of a calendar year but the profits of a preceding accounting year. This results in the simple fact that no business ever pays tax on the profits which the business makes, except by the most curious fluke which I imagine happens once in 5 million times. Because complications arise out of the commencing years of a business and the closing years of a business, obviously in the commencing year of a business one cannot deal with it on the basis of a preceding year because there was not one. Because of the complications of the opening and closing years, the situation results that never during the lifetime of a business does it pay tax on the profits which it has made during its lifetime. That is the present system.
The alternative system provided in this proposed Clause substitutes the current year's profits for the previous accounting year's profits. That, I repeat, is the logic of the situation and is the method by which assessments are based in respect of all salary earners and Schedule E liability. That is the natural way, and many arguments in favour of this method have been advanced by most illustrious bodies. The most obvious argument is that one pays one's tax in respect of the profits that one is earning. It is right that if a person makes high profits he should feel the impact of high taxation at the time he makes those profits. Similarly, if a person makes no profits his tax should be low. It is not at all helpful that, having made very high profits perhaps close on two years ago, one may suddenly be called on to pay very high taxation in a year in which very low profits indeed are made.
That is the first substantial argument in its favour. Another very substantial argument is that his method closes many loopholes which exist for tax avoidance under the present method. The loopholes are well known to hon. Members, because from time to time in Finance Bills we have had to deal with closing one loophole or another on this very matter. The last one was, I think, about two years ago, when we had a Clause for this very purpose. Many loopholes still exist, and, as the Royal Commission has


said, if this method were adopted the loopholes would be closed.
It gets rid of all the foreign complications which the Committee has already had to deal with on double taxation relief, complications arising from the fact that foreign countries sensibly have been taxing a company on one year's profits, whereas we in this country may have a very different basis of assessment. It has been impossible, therefore, simply to allocate one year's foreign tax against one year's British tax. There are great complications, to which this Finance Bill bears witness, which have had to be overcome or partly overcome by many complicated provisions.
A further argument in favour of the Clause is that it would not restrict a business from being reorganised, reconstructed, in the way which is thought fit and proper for the welfare of the business. At the moment there is a serious argument against doing this in many cases, because as a result of the arrangements for taxing profits of a business in the closing years, it may militate very considerably against the business that it should reconstruct at a particular time, and directors may wisely take the view that they should postpone reconstruction, postpone hiving off, whatever else they want to do, for perfectly good, solid business reasons. They postpone this in order to avoid being heavily assessed for tax because of the artificial system under which at the moment businesses are assessed in their closing years. The Clause would remove that inasmuch as every business would be assessed on the profits it makes, and nothing could be simpler than that.
However, obviously if there are all these arguments in favour—and they have been considered, among others, by the Royal Commission, and Clauses of this kind have been favourably thought of by such bodies—there must be some arguments the other way, and I will deal very shortly with the two main arguments the other way so as to show that, although they present difficulties, they are by no means insuperable difficulties.
The first obvious difficulty which will occur to the Committee is, how do we deal with the transitional period if, in previous years, a company has been assessed on the profits of the preceding

year, and, as from 5th April, as proposed in the Clause, it is to be assessed on the profits of the current year? How do we arrange the change over? This poses a question, but not, I repeat, any insuperable difficulty.
It is a well-known difficulty facing many businesses which have changes in their accounting period. For one reason or another a business may decide to change its accounting period. When it does change its accounting period exactly the same situation results as if all businesses change their accounting periods, which, in effect, will be the result of this Clause. When the accounting period does change there are provisions, with the details of which I need not bother the Committee, in the Finance Acts under which by and large justice is done, so that a company does not pay much more nor much less tax than it would have done if it had not changed its accounting date. For that purpose, obviously more than one year has to be taken into account. A number of years are taken into account and a sensible formula applied.
9.45 p.m.
If it were done in the same way with this change-over the effect would be that a company would be assessed for tax on a current-year basis, compared with what it would be on the previous-year basis, and justice, not rough justice, would be done in accordance with a formula very similar to that which exists already and which presents not so many difficulties to the practitioners. That, therefore, is the answer to the first main argument used against the change.
The second main argument against the change, and a substantial one, is the problem of collecting the tax. Quite simply, if we do not know what the profits of a business are during the course of the year in which it is engaged in making those profits, and if we are to have a system of taxing the business upon the current year's profits, then we are in difficulty about the basis on which the tax can be collected.
This is a matter no doubt close to the heart of the Chancellor of the Exchequer, but equally close to his heart is the desire to simpify the tax structure, as he said with great feeling in his first Budget speech. Therefore, anything that


has been fully considered and is a solid suggestion which will go a long way to simplify the tax structure is something which the right hon. and learned Gentleman will look at with care and sympathy.
The answer to this problem is simply that we have to have a provisional assessment. A business would be provisionally assessed, would pay the tax, and in due course when the profits for the year were known for certain there would be an adjustment upwards or downwards to make the tax paid equate with the tax payable. Admittedly, having a provisional assessment followed by an adjusting assessment creates a certain amount of additional work, but I suggest only a small amount. The total number of assessments of this kind is about 200,000. At least that used to be the right figure, but if the number has risen substantially no doubt the Government will say so. This is the total number of assessments of companies under cases I and II. This is a very small number when taken in proportion to the total number of assessments for tax purposes.
If it might be thought that to amend 200,000 assessments in this way was to create a certain amount of unnecessary labour, that could be cut down by saying that we should not bother about assessments for small amounts, for example, £2,000. It would matter very little whether a company was paying the exact amount of tax if its profits averaged £2,000. I suspect that there is a figure of £1,000 or £2,000 or £2,500 of profit-making by companies which would affect a large number of companies and a small amount of tax as a result of which the administrative difficulty of adjusting assessments would be much reduced without at the same time affecting the amount of tax collected very considerably.
If there is such a figure the Government will be aware of it and they could say that they would not bother to have adjustments made for this particular band below a certain figure. I say, therefore, that there is no substantial argument against converting the assessment of profits to a current-year basis as opposed to a previous-year basis and I would repeat the principles which I mentioned at the beginning of my remarks.
The Clause introduces simplicity where there is at the moment complexity. There is great complexity in the opening and closing years of a company's business. Every company would now know quite simply what its liability was, although it would not know it immediately. It introduces relevance in the place of irrelevance. It is totally irrelevant to be paying tax on a very large profit two years later when one is making a small profit. It substitutes fair shares in taxation for unfair shares, because it would close up all the loopholes, which are quite substantial and much in use, as a result of which certain companies are able to avoid a fair proportion of their tax.
It substitutes justice for injustice where a company which, for perfectly good business reasons, alters and reconstructs its accounting year and finds itself under the present system penalised in having to pay a quite disproportionate amount of tax, which could not arise if the new Clause were adopted.
The new Clause has strong support in addition to that of my right hon. Friends, which I naturally rank first. It has the support of the Royal Commission. In paragraph 774 of its Report the Royal Commission says:
there is no objection to transferring a company's profits to the current year basis, even though the profits of the individual or partnership have to be left, as we accept they must be, on the basis of the preceding year.
The Committee will be aware that I have been dealing with companies throughout.
In paragraph 776 the Royal Commission comes out quite specifically and says:
We have come to the conclusion that a change to the current year basis is both feasible and desirable in the case of companies.
That is very strong support indeed from the Royal Commission, and the arguments have been supported by many people who have given careful thought to the matter over the years. The Institute of Chartered Accountants, one knows from its annual reports, has repeatedly pressed this on Chancellors of the Exchequer and has reminded successive Chancellors that the previous Chancellor had not yet thought fit to adopt it.
With all that weight of support, with all the arguments in its favour and with a new Chancellor anxious to simplify our tax system, I have every hope that the new Clause will be given sympathetic consideration.

Mr. Bruce Milan: On the face of it, this is rather a technical point. I know that the Committee likes to deal with points of substance, either by putting taxes up or, rather, by taking taxes off—that is the sort of thing that interests the Committee as a whole—but it is useful that we should have an occasional discussion on a point like this which raises a good many issues of quite considerable principle.
I do not want to add very much to what my hon. Friend the Member for Gloucester (Mr. Diamond) has so competently put as the case for the Clause, but it is worth quoting one of the paragraphs from the Royal Commission Report. In paragraph 770, the Royal Commission says that
in so far as there is any general principle which can serve as a starting point for inquiry, we think that it suggests a preference for the current year basis. This for two reasons. One is that the preceding year basis is artificial and, being artificial, introduces complications and, sometimes, anomalies in the taxation of the opening and closing years of a source of income. The other is that the current year basis brings the weight of tax more immediately into relation with the income that it is taxing, and this we regard as an advantage in itself.
That seems to me to sum up the arguments in principle for the current year basis. I imagine that the arguments which the Government put against the Clause are not so much arguments in principle as arguments of practical consideration, particularly with regard to the transitional provisions.
The new Clause is a restricted one in so far as in the first case it deals only with Case I or II of Schedule D, and, secondly, only with incorporated companies, of which, as my hon. Friend said, there are about 200,000 compared with about 1½ million individual traders or partnerships. That makes a considerable difference to the practical working of the current year basis of assessment.
My hon. Friend the Member for Gloucester admitted that, if we went over to a current year basis of assessment, we would be involved in provisional

assessments, and then final adjustments when the actual profit of the year of assessment was finally known. But, of course, at present it is not unknown for there to be provisional assessments on company profits. Even on the basis of the preceding year of assessment, and even with the more generous arrangements allowed for getting assessments agreed, provisional assessments are still quite a common feature today.
There is nothing new in the principle of having provisional assessments on company profits. This proposal would simply be an extension of provisional assessments to the ordinary assessments for companies, rather than the restriction to those cases in which the assessment cannot be agreed before the actual liability is due to be paid. There is no extension of principle here, and it is possible to exaggerate the amount of work involved in giving provisional assessments. It does not have to involve any considerable amount of work, either on the part of the Inland Revenue or of the taxpayer.
Because of the complications of opening and closing years of assessment, and the other complications that one gets into about such things as double taxation, there is, in principle, a very considerable argument in favour of this change, and I hope that the Government will look at it with favour. The other day, in answer to a debate on another Clause, the Financial Secretary talked in terms of this sort of change involving the Government in the loss of about £100 million of tax revenue in the transitional period. I find it completely incredible that there should be a loss of anything like that amount, or, indeed, that there should be a loss at all if the transitional arrangements were properly drawn.
I hope that the Financial Secretary, if he is to use that as an argument for rejecting this Clause, will substantiate that figure and let us know how the Government have calculated it, and also tell us why, in any case, we should have to have a loss of any amount during the transitional period. It seems to me that there are no technical reasons why there should be a loss of anything like that amount. If the transitional arrangements were properly drawn there would be no need for the Treasury to suffer any loss.

Sir E. Boyle: As the hon. Members for Gloucester (Mr. Diamond) and Glasgow,


Craigton (Mr. Millan) have clearly explained, the intention of the Clause is to introduce a current-year basis of assessment to Income Tax for the trading profits of companies, instead of the preceding-year basis which normally applies at the present time. I quite agree that this is an important subject, and it is very suitable, in the course of discussion on the Committee stage of the Finance Bill, that we should spend a little time considering the structure of the tax system and not devote attention only to reliefs. Thus, I make no complaint about this important topic being raised.
This idea follows a recommendation of the Royal Commission which is to be found in paragraphs 770 to 780 of the final Report. I hope that the Committee will not mind if I give an outline of the Commission's proposal, because it may be of help. That proposal was that provisional Income Tax assessments each year should be made on all companies on the preceding-year basis, and then the assessments should be adjusted to the actual profits of the Income Tax year, when the actual figures became available. The taxpayer would have to pay a commercial rate of interest on any amount by which the tax on the provisional assessment fell short of the final assessment. The liability for the last two years before the current-year basis of assessment came into effect would be adjusted to a 24 months' proportion of the profits for the last three years of trading before the new basis came into operation.
10.0 p.m.
In the Royal Commission's plan, there would also have to be provision to ensure that in the transitional period, to quote from the Royal Commission Report:
all expenditure which would have been admissible for investment allowance is taken into account as qualifying for tax relief.
The Royal Commission preferred the current-year basis for a number of reasons. First and foremost, it preferred it on principle because it felt, as hon. Members who have spoken tonight have felt, that the preceding-year basis was artificial and consequently introduced complications and anomalies in the opening and closing years of a business. Correspondingly, a current-year basis would bring the tax into closer relation with the income which was taxed.
Quite apart from the general principle, there were a number of more detailed considerations which impressed the Royal Commission. It pointed out, first, that under the preceding-year basis the general result was that companies paid for two years on the basis of the profits of a particular year in the early years of the business, while the profits in a period were omitted for assessment when the company went out of business. I will return to that later in dealing with what the hon. Member for Gloucester said about tax avoidance.
Secondly, there is the difficulty, to which the hon. Member for Gloucester alluded, that where a company has a genuine commercial reason to wish to amalgamate, or hive off part of its business to a subsidiary formed for the purpose, the existing rules might result in a double assessment. Thirdly, on the preceding-year basis a business may be deprived of one year's double tax relief because where one year's income is used twice as a basis for assessment, the law requires refusal of relief for the duplicate year. In passing, I remind the Committee that Clause 15 of this year's Finance Bill contains provisions intended to deal with this anomaly.
The Royal Commission accepted that individuals and partnerships should be left on the present basis of assessment and its scheme, if adopted, would therefore apply just to a large number of companies. The hon. Member asked about the number of assessments which would be affected, and the best figure which I can now give is about a quarter of a million assessments.
I recognise, and I am sure that the whole Committee recognises, that many of these arguments are strong. I agree that in theory there is much to be said for the case which the Royal Commission put forward. But I must advise the Committee that there is a number of very real and practical difficulties. I do not want to make too much of the technical defects of the Clause. It was quite a feat to keep it in order and I fully realise that the proviso that
no such charge shall be greater than it would have been but for this section
has been included merely for the purpose of keeping the Clause in order.
I also feel sure that hon. Members opposite are fully aware of the defects


of subsection (2), which leaves all the necessary legislative provisions to be dealt with by regulations made by the Commissioners of Inland Revenue. I should certainly have thought that it would be common ground between us that matters such as the imposition of a provisional liability calculated on the preceding year's profits, provision for payment of interest and the provisions dealing with the changeover from the old to the new basis were all matters which ought to be settled as precisely as possible by Act of Parliament, after discussion in the House of Commons.
Instead of dealing with any technical defects in the Clause as drafted, I want to turn to the general difficulties which would result from any attempt to implement this recommendation of the Royal Commission. In the first place—and this is a point to which the hon. Member for Gloucester referred—I must leave the Committee in no doubt that this change would impose a very heavy additional burden on our tax machine. The need to make this very large number of provisional assessments based on the preceding year's profits, followed by subsequent adjustments to bring the assessments into line with the current year's profits, would involve a substantial amount of extra work for both the Inland Revenue and for the companies and their accountants. Certainly under the Royal Commission's scheme it would take us much longer than it does now to reach a final settlement of a company's liability for a particular year.
Secondly, the requirement that a company should pay tax on a provisional assessment, at the same time as it would have to find any extra tax due under an adjustment of the previous year's liability, could have very harsh results where that company's profits had risen sharply, only to fall off again. It would have at some stage to find tax on the high profits nearly twice over, because there would be an upward adjustment of the liability for the year in which the profits were earned, at the same time as the profits were taken as the basis of the provisional liability of the following year, the year in which the profits fell off again.
That is a serious difficulty about this scheme. It is a point which we

ought to consider when considering the Royal Commission's proposal. It is true that the company would get the excess tax back about twelve months later, but meanwhile it would have had to make, in effect, a forced loan to the Government, and I think that it could prove seriously damaging to British industry if an enterprising company in temporary difficulties were, as a result of our tax system, forced to produce a balance sheet which made these difficulties look more serious than they were.
When we are considering our system of company taxation, do not let us ever underrate the power of company reports and public comment on these reports to influence our general rate of economic progress.

Mr. Diamond: I did not deal with this point, because I considered it completely invalid. The point assumes that a company will be taxed on the previous year's accounting profit. There is nothing in the new Clause which necessitates that the company should say, "We made X profit last year. This year we have made 2X profit. We want to pay twice the amount of tax".

Sir E. Boyle: I do not see how any new Clause could avoid the difficulty that where a company's profits had risen sharply only then to fall off later, it might at some stage have to find the tax on the higher profits nearly twice over, and would produce a balance sheet which made the company's affairs look much more serious than they were.

Mr. Millan: The question of provisional assessments already arises. If there is some delay in getting agreement on assessment, or perhaps becaue the accounts have not been lodged with the Revenue, it is common at the moment to have a provisional assessment. It is also common to get some sort of agreement between the Revenue and the taxpayer as to the amount of provisional assessment. The Revenue may in the first instance issue an assessment of a grossly exaggerated figure, but if that happens the taxpayer is normally able to come to an arrangement with the Revenue whereby he pays something far nearer what the actual result will be.

Sir E. Boyle: I see the hon. Gentleman's point, but I cannot help feeling that there is a difference between the


present situation where there is often a long period of negotiation between the Revenue and the company where there is a provisional assessment, and the situation which would inevitably arise if we adopted the Commission's proposals. I will not pursue the point further except to say that this is a serious matter which we ought to consider before making any large-scale change in the system of company taxation.
The third point, and this is the most important consideration of all, is that launching the scheme would create in the short-term a serious budgetary problem. It is of the essence of the Royal Commission's scheme that all capital expenditure which would have qualified for the initial or investment allowance, but for its introduction, should obtain the benefit of that allowance. This would mean that allowances would have to be given not only for current qualifying capital expenditure but also for the qualifying capital expenditure incurred before the starting date of the new scheme which had not so far resulted in the grant of an initial or investment allowance—that is to say, on an average about fifteen months' capital expenditure.
To give allowances on this capital outlay at once, under a scheme coming into effect now, would cost about £200 million. Even if this cost were to be spread over three years it would cost about £55 million in the first year and about £65 million and £80 million in the second and third years respectively. Therefore, at present, considerations of cost alone rule out any change to a scheme on the lines recommended by the Royal Commission. Admittedly, the cost to the Exchequer for these initial years would be more than recovered in the long run.

Mr. Diamond: Hear, hear.

Sir E. Boyle: But, as Lord Keynes once remarked, "In the long run we are all dead." My right hon. and learned Friend cannot possibly accept any large extra burden on the Budget during the current year, for the reasons which have so often been stated in these debates.

Mr. W. R. Rees-Davies: The argument which is inescapable from my hon. Friend's observations is that our tax structure is in such a mess that it is almost impossible to clear it up without there being two consequences.

First, an immense burden will be placed on the men who have to clear it up—the officials of the Inland Revenue—and, secondly, there will be a loss of tax to the Inland Revenue during the period when it is being cleared up. Are not we led inescapably to the conclusion that although it is manifestly right that something on the lines of the Clause should be brought into effect at some time, not only in theory but in reality, it can never be done because our tax structure is so complicated that there would have to be a standstill in taxation to bring this change about?

Sir E Boyle: The answer to my hon. Friend's question is "No, Sir". If he listens to my concluding remarks he will see that I do not reach such a pessimistic conclusion as he has suggested. I know that some anxiety has been expressed about the possibilities of tax avoidance under our present system. These turn on the fact that in the closing years of a business one year's profits drop out of assessment. Under the present law, the assessment for the final year is on the actual profits; for the penultimate year the assessment is normally based on the profits of the year before that. In the ordinary way, therefore, the penultimate year's profits drop out of the charge to tax.
In the past, the most serious devices designed to exploit this situation have taken the form of "company reconstruction" on an occasion when a company, after a period of high profits, has run into a period of low profit. But this device was substantially counteracted by the provisions of Section 17 of the Finance Act, 1954. We certainly have the subject still in mind, and if ever remedial measures should be necessary my right hon. and learned Friend will not hesitate to take them.
Lastly, I want to make it clear to the Committee and to my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) that my right hon. and learned Friend has by no means closed his mind on the question of company taxation. He has already stated in his Budget speech that he proposes to examine further, before his next Budget, the idea of having one system of taxation instead of Income Tax and Profits Tax. Under such a system it would be natural to change the basis of assessment to a


current-year basis. For various reasons the Royal Commission came down against this idea, and my right hon. and learned Friend has admitted that the difficulties mentioned in the Royal Commission's Report have not yet been resolved. My right hon. and learned Friend has no intention of introducing a new system which, in practice, proves to be more complicated and to present greater difficulties—and, perhaps, greater inequity—than the present one. For the reasons I have explained, he cannot advise the Committee to accept the new Clause.
I can, however, repeat his assurance that the matter of company taxation is still under review, and that he would like to examine very fully the possibility of having one system of taxation for companies instead of two, if such a system can be satisfactorily devised.

10.15 p.m.

Mr. Houghton: I wish that hon. Gentlemen opposite had felt able to take a larger part in this most important debate.

Mr. Nabarro: There are more important things to consider.

Mr. Houghton: I know that the hon. Member for Kidderminster (Mr. Nabarro) is impatient to get on to the Schedule A lobby, but this is a matter which we have not discussed in the Committee so far as I can remember, since the Royal Commission's Report was published in 1955. We have certainly not given the attention to it which we are desirous of doing this evening. It is only 10.15. There is plenty of time. When hon. Members opposite really get their teeth into something, they do not mind going on through the night, and this matter is of such importance that I can assure hon. Gentlemen opposite that we shall co-operate with them very fully in debating it thoroughly.
It really is an important matter, and as the Financial Secretary said, it is as well that we should spend a little time discussing the structure of our tax system and not confine our debates solely to reliefs. There are hon. Gentlemen opposite who are businessmen and lawyers. I do not see the hon. Member for Brighouse and Spenborough (Mr. Shaw), who is an accountant, but I see

the hon. Baronet the Member for Sheffield, Heeley (Sir P. Roberts), who occupies a very important and influential position in the business world. Has not the hon. Baronet views on the subject which he would care to give to the Committee? He murmured something from a sitting position while the Financial Secretary was speaking, but I was not sure what was receiving his approval.

Sir Peter Roberts: I was indicating my approval.

Mr. Houghton: I understood that the hon. Baronet was indicating his approval, but I was not sure what it was that he was approving.

Sir P. Roberts: I was approving the Government's point of view.

Mr. Houghton: The hon. Baronet is a faithful supporter of Her Majesty's Government, come what may. I am sure that his support will be greatly valued by the Government Front Bench.
Little reference has been made in the debate to the labours of the Millard Tucker Committee on this matter. That was the first Committee in recent years to devote a good deal of time and thought to this complicated problem. The Millard Tucker Committee came down against any change on the ground, as it said in paragraph 66 of its Report, that it was impractical in this country in present conditions.
The strange thing is that three members of the Millard Tucker Committee were also members of the Royal Commission. Sir James Millard Tucker himself was chairman of the Millard Tucker Committee and a member of the Royal Commission. Mr. George Woodcock, now the general secretary of the Trades Union Congress, was a member of both, and Sir William Carrington, past president of the Institute of Chartered Accountants, also was a member of both.
Both the Millard Tucker Committee and the Royal Commission had the same secretary. I am not suggesting that the secretaries of Committees necessarily decide policy, but they frequently influence conclusions. Anyway, he is now a member of the Board of Inland Revenue and has his part to play in formulating official opinion at Somerset House.
Another thing is that the minority Report of the Radcliffe Commission also supported the majority of the Royal Commission on the question of the change in the basis year. So we have the Millard Tucker Committee, which was rather appalled by the difficulties and complications of the matter, reporting against a change, and three members—half of the membership of the Committee—serving also on the Radcliffe Commission, who joined with the Commission in recommending in a contrary sense to the findings of the Millard Tucker Committee. It is most significant that one half of the members of the Millard Tucker Committee apparently changed their view on the matter when, subsequently, they became members of the Royal Commission.
The difficulties are, no doubt, formidable, but it is interesting to note that both the Millard Tucker Committee and the Radcliffe Commission received more representations in favour of a change to the current year than they received in favour of retaining the preceding year basis. The Millard Tucker Committee confessed openly in its Report that it had received this rather overwhelming volume of evidence in favour of the change and was therefore disposed to find some way of making the change if it could.
We understand, as my hon. Friend the Member for Gloucester said, that the Institute of Chartered Accountants is in favour of this change. I see the President of the Income Tax Payers' Society, the hon. Member for Portsmouth, Lang-stone (Mr. Stevens) in his place. I rather think that the Income Tax Payers' Society is also in favour of this change.
I do not know what corporate opinion is in the business world, but it now seems that this unresolved question should receive examination from all quarters. I hope that in considering the major question of reconstruction of company taxation the Chancellor will bring into his consideration the basis year and take the widest opinions about it. There is no doubt that the chief drawback of the preceding year basis up to now has been the complexities and manipulations of the commencing and cessation provisions.
The Financial Secretary, I hope with no particular sense of virtue, referred to the Finance Act, 1954, when an attempt was made to stop what was then appearing to be a scandalous form of tax avoidance by companies which were going out of business, transferring themselves to holding companies in order to take advantage of the cessation provisions and getting the benefit of taxation on falling profits after a period of sharply rising profits. My hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) first drew the attention of the House and the Committee to the millions of pounds which were going down the drain on account of this manipulation of the cessation provisions. That stable door was closed after a good many horses had gone. It is by no means certain that it is foolproof even now.
The Radcliffe Commission drew attention, in paragraph 775, to the three points of argument in favour of the current year basis for business profits. One of them, as the Financial Secretary pointed out—sub-paragraph 3 of paragraph 775—referred to the complexities of the previous year basis for the purpose of double Income Tax relief of companies operating in countries where the current year basis was taken. He reminded the Committee that Clause 15 of this Finance Bill is an attempt—belated indeed—to implement a suggestion of the Royal Commission of 1955 to remedy anomalies on that score.
We pointed out when we were discussing Clause 15 that all that would be unnecessary, and a great deal else besides, had we adopted the current year basis. We feel that the Financial Secretary's reply is not sufficiently reassuring about the consideration which will be given to this matter by his right hon. and learned Friend. There is something very important here to be done. There is no sign yet of the determination to do it. I think that a bad thing for taxation, it is a bad thing for this Committee and for the House, to have weighty opinion, whether it is on one side or the other, on this question unresolved by further study and advice from all quarters where information should be sought.
Therefore, we shall ask the Committee to divide on the Clause. We do not think that that is an irresponsible act.


There may be hon. Members opposite who feel as keenly as we do that something should be done. They may wish to join us in registering an opinion to that effect. I sincerely hope that, whatever happens as a result of the debate, the Committee and the Chancellor will appreciate that this is a most important question on which we shall certainly hope to receive from him the result of his further researches and consideration during the next twelve months.

Mr. Diamond: May I detain the Committee for just two minutes and, as the Chancellor of the Exchequer is here, invite him to reconsider the evidence submitted to him? He will recognise that the Institute of Chartered Accountants, which has members sitting on the benches opposite, has repeated its advice in this connection. As a practitioner, I cannot accept the fact that the right hon. and learned Gentleman has been fully and accurately advised with regard to the two difficulties he mentioned. They are the old difficulties of the provisional assessment and the collection of tax in the meantime.

A standard printed form goes out to every accountant saying with regard to every company of a substantial size, "What do you recommend that your client should pay in the meantime?" This is absolutely standard practice at this minute. There is nothing new. I repeat what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) has said already. Every practitioner finds—I invite any hon. Member opposite who is a practitioner to give the benefit of his experience if it is different from mine—that in the majority of cases, of large companies at all events, a first assessment has to be made and a revision later because of the complications resulting from a company's activities and the need for some tax to be paid in the meantime. In short, with regard to the two major difficulties which have been advanced against this, and which have always been advanced against it, the Chancellor is inadequately informed, because the practice already takes account of the suggestions made in the Clause.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 138, Noes 210.

Division No. 213.]
AYES
[10.28 p.m


Ainsley, William
Hamilton, William (West Fife)
Mapp, Charles


Allaun, Frank (Salford, E.)
Hannan, William
Marquand, Rt. Hon. H. A.


Allan, Scholefield (Crews)
Hart, Mrs. Judith
Marsh, Richard


Awbery, Stan
Hayman, F. H.
Mason, Roy


Bacon, Miss Alice
Henderson, Rt. Hn. Arthur (Rwly Regis)
Mellish, R. J.


Baird, John
Herbison, Miss Margaret
Millan, Bruce


Baxter, William (Stirlingshire, W.)
Hill, J. (Midlothian)
Milne, Edward J.


Blyton, William
Hilton, A. V.
Mitchison, G. R.


Boardman, H.
Holman, Percy
Monslow, Walter


Bowden, Herbert W. (Leics, S. W.)
Holt, Arthur
Moyle, Arthur


Boyden, James
Houghton, Douglas
Mulley, Frederick


Braddock, Mrs. E. M.
Howell, Charles A (Perry Barr)
Neal, Harold


Broughton, Dr. A. D. D.
Howell, Denis (Small Heath)
Oram, A. E.


Brown, Rt Hon. George (Belper)
Hoy, James H.
Owen, Will


Callaghan, James
Hughes, Emrys (S. Ayrshire)
Padley, W. E.


Craddock, George (Bradford, S.)
Hughes, Hector (Aberdeen, H.)
Parker, John


Crosland, Anthony
Hunter, A. E.
Parkin, B. T.


Crossman, R. H. S.
Irvine, A. J. (Edge Hill)
Pearson, Arthur (Pontypridd)


Cullen, Mrs. Alice
Janner, Sir Barnett
Pentland, Norman


Davies, Ifor (Gower)
Jay, Rt. Hon. Douglas
Popplewell, Ernet


Davies, S. O. (Merthyr)
Johnson, Carol (Lewisham, S.)
Price, J. T. (Westhoughton)


Deer, George
Jones, Dan (Burnley)
Probert, Arthur


Diamond, John
Jones, J. Idwal (Wrexham)
Roberts, Albert (Normanton)


Donnelly, Desmond
Jones, T. W. (Merioneth)
Roberts, Goronwy (Caernarvon)


Dugdale, Rt. Hon. John
Kelley, Richard
Robertson, John (Paisley)


Edelman, Maurice
King, Dr. Horace
Robinson, Kenneth (St. Pancras, N.)


Edwards, Rt. Hon. Nets (Caerphilly)
Lawson, George
Rogers, G. H. R. (Kensington, N.)


Edwards, Robert (Bilston)
Lee, Frederick (Newton)
Ross, William


Evans, Albert
Lever, L. M. (Ardwick)
Short, Edward


Fernyhough, E.
Lewis, Arthur (West Ham, N.)
Slater, Mrs. Harriet (Stoke, N.)


Fitch, Alan
Logan, David
Slater, Joseph (Sedgefield)


Fletcher, Eric
Loughlin, Charles
Small, William


Fraser, Thomas (Hamilton)
Mabon, Dr. J. Dickson
Smith, Ellis (Stoke, S.)


Gordon Walker, Rt. Hon. P. C,
MacColl, James
Soskice, Rt. Hon. Sir Frank


Gourlay, Harry
McInnes, James
Spriggs, Leslie


Grey, Charles
McKay, John (Wallsend)
Steele, Thomas


Griffiths, David (Rother Valley)
Mackie, John (Enfield, E.)
Stewart, Michael (Fulham)


Hale, Leslie (Oldham, W.)
Mallalieu, J. P. W. (Huddersfield, E.)
Stonehouse, John


Hail, Rt. Hn. Glenvll (Colne Valley)
Manuel, A. C.
Stones, William




Strachey, Rt. Hon. John
Thornton, Ernest
Willis, E. G. (Edinburgh, E.)


Stross, Dr. Barnett (Stoke-on-Trent, C.)
Tomney, Frank
Wilson, Rt. Hon. Harold (Huyton)


Sylvester, George
Wade, Donald
Woodburn, Rt. Hon. A.


Symonds, J. B.
Wainwright, Edwin
Woof, Robert


Taylor, Bernard (Mansfield)
Warbey, William
Yates, Victor (Ladywood)


Taylor, John (West Lothian)
Wigg, George



Thompson Dr. Alan (Dunfermline)
Wilcock, Group Capt. C. A. B.
TELLERS FOR THE AYES:


Thornton, G. M. (Dundee, E.)
Wilkins, W. A.
Mr. Sydney Irving and Mr. Redhead.




NOES


Agnew, Sir Peter
Green, Alan
Osborne, Sir Cyril (Louth)


Aitken, W. T.
Grimston, Sir Robert
Page, John (Harrow, West)


Allan, Robert (Paddington, S.)
Grosvenor, Lt.-Col. R. G.
Page, Graham (Crosby)


Atkins, Humphrey
Gurden, Harold
Pannell, Norman (Kirkdale)


Balniel, Lord
Hall, John (Wycombe)
Partridge, E.


Barber, Anthony
Hamilton, Michael (Wellingborough)
Pearson, Frank (Clitheroe)


Barter, John
Harris, Reader (Heaton)
Peel, John


Batsford, Brian
Harrison, Col. Sir Harwood (Eye)
Percival, Ian


Beamish, Col. Sir Tufton
Harvey, Sir Arthur Vere (Macclesf'd)
Pickthorn, Sir Kenneth


Bennett, F. M. (Torquay)
Harvey, John (Walthamstow, E.)
Pilkington, Sir Richard


Bennett, Dr. Reginald (Gos &amp; Frm)
Harvie Anderson, Miss
Pitt, Miss Edith


Berkeley, Humphry
Hastings, Stephen
Pott, Percivall


Bidgood, John C.
Heald, Rt. Hon. Sir Lionel
Powell, Rt. Hon. J. Enoch


Biggs-Davison, John
Henderson, John (Cathcart)
Price, David (Eastleigh)


Bishop, F. P.
Hendry, Forbes
Prior, J. M. L.


Black, Sir Cyril
Hiley, Joseph
Prior-Palmer, Brig. Sir Otho


Borne-Arton, A.
Hill, Mrs. Eveline (Wythenshawe)
Proudfoot, Wilfred


Box, Donald
Hirst, Geoffrey
Pym, Francis


Boyle, Sir Edward
Hocking, Philip N.
Quennell, Miss J. M.


Braine, Bernard
Holland, Philip
Ramsden, James


Brewis, John
Hollingworth, John
Rawlinson, Peter


Brooman-White, R.
Hopkins, Alan
Redmayne, Rt. Hon. Martin


Brown, Alan (Tottenham)
Hornby, R. P.
Rees, Hugh


Browne, Percy (Torrington)
Hornsby-Smith, Rt. Hon. Patricia
Renton, David


Bryan, Paul
Hughes Hallett, Vice-Admiral John
Roberts, Sir Peter (Heeley)


Buck, Antony
Hughes-Young, Michael
Robinson, Sir Roland (Blackpool, S.)


Bullus, Wing Commander Eric
Hurd, Sir Anthony
Ropner, Col. Sir Leonard


Burden, F. A.
Iremonger, T. L.
Shaw, M.


Campbell, Gordon (Moray A Nairn)
Irvine, Bryant Godman (Rye)
Shepherd, William


Carr, Compton (Barons Court)
Jackson, John
Smith, Dudley (Br'ntf'rd A Chiswick)


Carr, Robert (Mitcham)
James, David
Smithers, Peter


Cary, Sir Robert
Johnson, Eric (Blackley)
Speir, Rupert


Chichester-Clark, R.
Johnson Smith, Geoffrey
Stevens, Geoffrey


Clark, William (Nottingham, S.)
Jones, Rt. Hn. Aubrey (Hall Green)
Steward, Harold (Stockport, S.)


Clarke, Brig. Terence (Portsmth, W.)
Kaberry, Sir Donald
Stodart, J. A.


Cleaver, Leonard
Kerr, Sir Hamilton
Studholme, Sir Henry


Cole, Norman
Kirk, Peter
Summers, Sir Spencer (Aylesbury)


Cooper-Key, Sir Neill
Lambton, Viscount
Talbot, John E.


Cordeaux, Lt.-Col. J. K.
Langford-Holt, J.
Taylor, Edwin (Bolton, E.)


Cordle, John
Legge-Bourke, Sir Harry
Thomas, Leslie (Canterbury)


Corfield, F. V.
Lewis, Kenneth (Rutland)
Thomas, Peter (Conway)


Costain, A. P.
Lindsay, Martin
Thompson, Kenneth (Walton)


Coulson, J. M.
Litchfield, Capt. John
Thompson, Richard (Croydon, S.)


Craddock, sir Beresford)
Lloyd, Rt. Hon. Selwyn (Wirral)
Thornton-Kemsley, Sir Colin


Critohely, Julian
Longden, Gilbert
Tiley, Arthur (Bradford, W.)


Crosthwalte-Eyre, Col. Sir Oliver
Loveys, Walter H.
Turner, Colin


Cunningham, Knox
Low, Rt. Hon. Sir Toby
Turton, Rt. Hon. R. H.


Curran, Charles
Lucas-Tooth, Sir Hugh
van Straubenzee, W. R.


Currie, G. B. H.
MacArthur, Ian
Vickers, Miss Joan


Dalkeith, Earl of
McLaren, Martin
Vosper, Rt. Hon. Dennis


d'Avigdor-Goldsmid, Sir Henry
McMaster, Stanley R.
Wakefield, Edward (Derbyshire, W.)


Deedes, W. F.
Macmillan, Rt. Hn. Harold (Bromley)
Walder, David


de Ferranti, Basil
Macmillan, Maurice (Halifax)
Walker, Peter


Donaldson, Cmdr. C. E. M.
Macpherson, Niall (Dumfries)
Walker-Smith, Rt. Hon. Sir Derek


du Cann, Edward
Maddan, Martin
Wall, Patrick


Duncan, Sir James
Maginnis, John E.
Ward, Dame Irene


Elliot, Capt. Walter (Carshalton)
Markham, Major Sir Frank
Webster, David


Elliott, R.W. (Nwcstle-upon-Tyne, N.)
Marshall, Douglas
Williams, Dudley (Exeter)


Emery, Peter
Matthews, Gordon (Meriden)
Williams, Paul (Sunderland, S.)


Errington, Sir Eric
Mawby, Ray
Wills, Sir Gerald (Bridgwater)


Fair, John
Maxwell-Hyslop, R. J.
Wilson, Geoffrey (Truro)


Finlay, Graeme
Mills, Stratton Montgomery, Fergus
Wise, A. R.


Fraser, Ian (Plymouth, Button)
More, Jasper, (Ludlow)
Wolrige-Gordon, Patrick


Freeth, Danzil
Morrison, John
Woodhouse, C. M.


Gammans, Lady
Nabarro, Gerald
Woodnutt, Mark


Gibson-Watt, David
Noble, Michael
Worsley, Marcus


Glover, Sir Douglas
Nugent, Sir Richard
Yates, William (The Wrekin)


Glyn, Dr. Alan (Clapham)
Oakshott, Sir Hendrie



Goodhart, Philip
Orr-Ewing, C. Ian
TELLERS FOR THE NOES:


Goodhew, Victor
Osborn, John (Hallam)
Mr. J. E. B. Hill and Mr. Whitelaw.


Grant, Rt. Hon. William




Grant-Ferris, Wg Cdr. R.

New Clause.—(EXEMPTION FROM SCHEDULE A FOR OWNER-OCCUPIERS.)

(1) Where the total income of an individual includes or would but for this section, include any sum under Part III of the Income Tax Act, 1952, in respect of a house or tenement of which the said individual is both owner and occupier, the sum aforesaid shall, subject to the provisions of this section, be disregarded, for all the purposes of the Income Tax Acts other than the furnishing of information.

(2) No individual shall be exempted from assessment under Schedule A by virtue of this section in respect of more than one house or tenement in any year of assessment.

(3) For the purposes of this section, a house owned by a married woman living with her husband and occupied by them shall be deemed to be owned and occupied by the husband.—[Mr. Nabarro.]

Brought up, and read the First time.

Mr. Nabarro: I beg to move, That the Clause be read a Second time.

The Temporary Chairman (Sir Samuel Storey): I think it would be for the convenience of the Committee if with this Clause we also discussed the proposed Clause—(Abolition of Schedule A income tax).

Mr. Nabarro: That Clause, Sir Samuel, in the name of six Liberal Members has substantially the same effect as the Clause which I am moving, which is in the names of nineteen of my hon. Friends and myself, and to debate the two Clauses together is, therefore, a matter of great convenience.
This is the third successive year that a Clause along these lines has been moved from the Conservative side of the Committee, and there is little doubt from the public and Parliamentary reactions to what has been said on earlier occasions that there is very widespread support in the country and substantial support in the House of Commons for an attack on Schedule A on owner-occupied houses—not on any other category, for reasons which I will explain in a moment. Therefore, my new Clause is devoted only to the principle of abolishing Schedule A on owner-occupied houses.
Last year the then Chancellor of the Exchequer was considered by many of my hon. Friends and myself, notably the supporters of my Clause this evening, to have made sympathetic noises in response

to the new Clause that I then moved. I quote Lord Amory, as he now is, speaking on 21st June, 1960:
I would sum up by saying that I think that there are strong arguments both for and against relief from Schedule A for owner-occupiers. I have owned to a personal inclination to regard the arguments for some relief at a practicable time as meriting very serious consideration."—[OFFICIAL REPORT, 21st June, 1960; Vol. 625, c. 267.]
I read that to my son, aged 14, and he replied, "Circumlocution, daddy"—

Sir Colin Thornton-Kemsley: A chip of the old block!

Mr. Nabarro: —for saying in about fifty words what the Chancellor could have said in about four words, but certainly leading my hon. Friends and myself to believe that something might be done in this Budget.
The right hon. Member for Huyton (Mr. H. Wilson) will recall the passages which followed during the course of his speech, directly after the then Chancellor spoke. He pointed to the present Lord Amory and said, "But you will not be there next year." A very prophetic fellow is the right hon. Gentleman. And, of course, a change of Chancellors inevitably means a change of emphasis in succeeding Budgets. What was held out as a vague promise to my hon. Friends last year has fallen by the wayside.
The Labour Party's position in this matter was clearly defined last year. Members of the Labour Party believe that relief for owner-occupiers should be given up to a maximum of £15 per annum. They support the principle whereby the smaller owner-occupied houses are relieved of Schedule A tax but whereby those of a larger size are not so relieved. I could not support, nor could my hon. Friends support, that view. We believe that the alleviation should be given to all owner-occupied houses, irrespective of size.
I object to the continuance of this form of taxation on three grounds: first, the inherent illogicality of the tax; secondly, that it is fiscally inequitable; thirdly, that it is grossly contrary to Conservative philosophy. First, the illogical basis of the tax. This is a tax on a notional income from owner-occupied houses so as to bring them into line with houses that are let and actually producing income.
As far as I am aware save only for the insignificant exception of the Schedule B tax which raises only £150,000 a year, there is no other known case of tax being levied on a notional income. It is therefore not an exaggeration to say that this tax is levied on an illogical and a quite exceptional basis. That point was put powerfully to the Royal Commission and reported in Cmd. 9474 in these words:
The witnesses who objected to the charging of tax on the owner-occupiers of dwelling-houses did so on the grounds (1) that notional income is not a fit subject for taxations; and (2) that it is inequitable to tax the beneficial enjoyment of a right of occupation of real property when the income which could, by parity of reasoning, be attributed to the owners of other forms of property (e.g., motor cars) goes untaxed.
Carrying that a stage further and putting it into more homely language, it seems to me that if one taxes a notional income from a house it would be equally valid to tax Mr. Smith, for example, on washing that Mrs. Smith might take in and the income derived from it but which she does not take in. It might be equally logical also to say to a man who is unemployed and in receipt of unemployment benefit, "We will tax you on £15 of wages that you might have earned if you were in employment." [HON. MEMBERS: "No."] Oh, yes, they are entirely notional considerations.
I believe that only actual income should be taxed and that no notional income should in any circumstances attract tax. Further, the 6½ million owner-occupiers of houses in this country resent most largely the payment of this Schedule A tax because they feel that the proceeds which the Revenue derives from it—not relatively very much—are in large measure being devoted to subsidising council houses, often with occupants who are much better off financially than people paying for their own houses.

10.45 p.m.

Mr. Houghton: I thought that the hypothetical cases which the hon. Gentleman quoted on the taxation of notional income were extremely weak. He will know that benefits in kind, the benefit of occupation of a flat or of other amenities in the case of directors or executives in receipt of over £2,000 a year are taxable under the Finance Act, 1948. The hon. Gentleman will also know that

beneficial occupation is also taxable where a landlord lets a house for below the market rental and that he may be taxed on notional receipts from that house.

Mr. Nabarro: No. I do not agree with the hon. Gentleman at all. As I have said—I think this will bear examination by those who are informed in taxation matters of this kind—notional income is not normally a proper subject for taxation, and that is the objection in principle, against the continued levying of Income Tax Schedule A.
But in fiscal terms, I said, it is certainly inequitable. I declared last year that I personally dislike Schedule A very much indeed. I contracted out of paying it some years ago. I have encouraged other people who are owner-occupiers to contract out of it. I have endeavoured to give the widest possible publicity to machinations which will legally result in Schedule A tax not being paid by owner-occupiers of houses.
The figures are quite startling in this regard. There are 6,600,000 owner-occupiers of houses in this country. Only 600,000 of them, or 9 per cent., submitted in the tax year 1960–61 claims for maintenance relief notwithstanding that over 6 million owner-occupiers probably repaired their houses at least as well as the 600,000 who submitted claims. On grounds of ignorance, or because they were too idle, or for some other reason unknown to us, they failed to submit claims for maintenance relief.
The result of that is that the Chancellor of the Exchequer is collecting Income Tax Schedule A from 6 million owner-occupiers this year simply because they are not fully informed as to how they can avoid paying the tax. [HON. MEMBERS: "No."] Well, the hon. Gentleman has made fourteen speeches today so far—

Mr. Houghton: I am going to make another.

Mr. Nabarro: Probably. I have no objection to his making an indefinite number, but I have not sat in my place listening to his fourteen speeches and shouting interruptions at him. I have listened painfully to a lot of matter on


taxation questions with which I fundamentally disagree. But I have let him say it.
I am now declaring, and declaring with wide support in the Committee and outside, that nine out of ten people are paying Schedule A tax as owner-occupiers simply because they are not fully instructed and informed as to how to avoid paying that tax. That is a statement which is widely supported, and I believe it to be true.
I appealed to the last Chancellor of the Exchequer and I appeal to the present Chancellor of the Exchequer to do a little better than present inspectors of taxes in the Inland Revenue practice by sending out a notice in the tiniest print and in the most obscure language telling owner-occupiers how they can claim relief from Schedule A tax. Of course, what the Chancellor should do is enclose with every assessment a colourful and explicit notice in the simpest terms saying, "The Chancellor of the Exchequer informs you that you need not pay this tax if only you will submit a maintenance relief claim in appropriate form."
Were I Chancellor I should encourage people not to pay this tax in view of the inequitable character of it. I think that it is highly immoral for the Chancellor of the Exchequer to collect taxes on a basis of misconception. For if those people were fully informed they would not be paying tax at all.

Mr. Diamond: The hon. Gentleman bases so much of his case on a totally incorrect fact, because the explanation is that most, if not all, the 6 million, if they did compute such claims, would find no claim would lie, because of the allowance they are already given.

Mr. Nabarro: That is not so. The hon. Gentleman who has just made a lengthy speech on complex company tax matters has not apparently taken the trouble fully to inform himself on this matter. Of course, Schedule A assessments are based on pre-war values. The fact is that repairs have increased enormously in price since pre-war days, and it is generally the case that the amount spent on the maintenance of a dwelling-house is vastly in excess of the statutory deduction. That was brought out clearly in the Royal Commission's Report.

Evidently the hon. Member has failed to read the appropriate passages of it. I commend to him paragraphs 827, 828, and the several paragraphs following, on Schedule A tax for dwelling-houses.
The Chancellor of the Exchequer, in my view, is behaving immorally in a tax sense in collecting this substantial sum of money from people who pay it under a misconception. It is fiscal prostitution. He is living immorally on earnings from Schedule A owner-occupiers and he ought to be appropriately ashamed of himself for doing so. Of course, making a Schedule A maintenance claim is often a complex matter. This is one of the reasons—and I address the hon. Member for Gloucester (Mr. Diamond)—why a large number of owner-occupiers do not make the claim.
It is often complicated to work out the five-year average to avoid paying the Schedule A tax. I confess that I cannot do it myself. On 6th April, the first day of every new tax year, I send a letter to my accountants saying, "Will you please inform me of the sum of money I should spend on the maintenance of my property this year in order to negative any liability to Schedule A tax?".

Mr. H. Wilson: The hon. Member has confirmed the point that is at the back of the minds of many of us. Is it not a fact that one of the major reasons why so small a proportion of owner-occupiers are able to claim this relief is not only that they have no accountants but that they do not have the money, either, to spend that amount on the repair and maintenance of their homes to be able to offset the effective Schedule A? The hon. Member presumably has.

Mr. Nabarro: I do not think that is a fair comment at all. There are very large numbers of owner-occupiers who maintain their property normally. After I confessed in Committee a year ago tomorrow that I paid no Schedule A tax, I was flooded the next morning with requests from national newspapers to write articles for them showing how I avoided paying this tax. I wrote an article in the Daily Mail forty-eight hours later on how not to pay the tax. Since then I have received in the last twelve months hundreds of letters from people of modest means living in semi-detached


houses in London and elsewhere asking me how it is done. I tell them. They give me their assessment value and I have given them in many instances the approximate sum that they should spend annually to avoid the tax, and that is not the excessive amount suggested by the right hon. Member for Huyton. Repainting the house inside and out every third year should cover a large part of the tax.
But I am not to be detracted on this point. The fact is that the Inland Revenue apparently will not publicise in a concise form all those groups of repairs which rank for Schedule A relief. It could be done very simply. They fall under twenty headings. Each one of them is a subject which costs the owner-occupier quite a sum of money over the year for repairs and I suggest to the Chancellor that if he wants to resist the new Clause the least he should do is widely to publicise the reliefs in terms similar to those which I shall give to the Committee and which are easily understood.
As to the first group, of course most owner-occupiers insure their house against fire. Premiums rank against Schedule A relief, along with premiums for insurance against storm, tempest and flooding. The accountancy fees for the preparation of the claim rank for relief under Schedule A. That is the answer to the right hon. Member for Huyton who said that people could not afford to employ accountants. The whole cost of employing an accountant to compile the Schedule A relief claim is chargeable against the tax and is allowable. [An HON. MEMBER: "If one has to pay it."] It is no good saying "If one has to pay it": 6 million people are paying it unnecessarily.

Mr. James Callaghan: Does not the hon. Gentleman understand that there are very few taxpayers who employ accountants? If they employed them, they would have to pay them. If they paid them, they would be allowed only so much of the fees as deductible at the standard rate from tax, and so there would still be a net cost to the taxpayers.

Mr. Nabarro: There is a net cost, but the preparation of a Schedule A claim by an average local accountant might cost

a couple of guineas—once a year—for an ordinary owner-occupier. He is allowed 7s. 9d. in the pound of that, as part of his maintenance relief claim for it, and it will count year by year as part of the five-year average.
I am now going to make my speech. I do not propose to give way again every ten seconds.
The average owner-occupier just does not know that his accountancy fees are admissible. I believe that the Inland Revenue should tell him. All legal fees incurred in fighting cases before the district commissioners are similarly chargeable against maintenance relief. One has to pay the solicitor, but one charges it back to the Inland Revenue and thence to the Chancellor of the Exchequer.
Also allowable axe: all decorations, internal and external; all plumbing and water supply and drainage system; repairs to all electrical equipment which is part of the structure of the building; all roofing repairs; all gates and fences and garden walls; all re-scarifying and re-gravelling or surfacing of entrance drives and paths; all repairs of drains, downspouts, gutters, tiling and roofing; all repairs to floors, wooden, tiled, concrete or otherwise; all repairs to sinks, draining boards, taps, including new washers; all nails, screws, bolts and sundry accessories for repairs; all fireplace repairs, stoves, firebricks and stool-bottoms; all repairs to boilers, calorifiers, tanks, water and central heating pipes; fixed radiators and similar appliances—I am pleased to see that the Chancellor is checking each of these items closely—all repairs to door-locks and doors; all repairs to lavatory pans and basins; all repairs to hard tennis courts.
I am pleased to admit that I have a hard tennis court in my garden. I send every year for the contractor who installed it to come and re-surface it and paint the white lines on it again. That is all admitted against a Schedule A maintenance claim. [Interruption.] Certainly it ought to be, and indeed it is. I will produce these receipted bills to right hon. Gentlemen opposite showing this to be so. The hon. Member for Sowerby (Mr. Houghton) is learning points. He should have known it a long time ago—

Mr. Houghton: rose—

Mr. Nabarro: I cannot give way again.

Mr. Houghton: rose—

Mr. Nabarro: Well, I am a generous fellow.

Mr. Houghton: I knew all that and quite a good deal more. If the hon. Gentleman likes to employ his wife to do some of these internal decorations in the home he can charge what he pays her for the work so long as it is reasonable and in line with contemporary rates which a skilled worker would earn.

11.0 p.m.

Mr. Nabarro: I have already enumerated sixteen headings. I will read the seventeenth to the hon. Gentleman verbatim:
Your wife or son or daughter's labour for maintenance
provided that—

Mr. Houghton: rose—

Mr. Nabarro: —there is a receipted bill. When I said to the hon. Member for Sowerby that he was learning something, it was because he was nodding his head in vigorous disagreement when I mentioned repairing and painting white lines on a hard tennis court which, evidently, he did not know.

Hon. Members: He does not play tennis.

Mr. Nabarro: That is the answer.
The twentieth item is windows, including glass, putty, window accessories and sash cords.
The twenty-first item is anything else you can get away with.

Mr. Callaghan: Monstrous.

Mr. Nabarro: It is not monstrous at all. I believe it to be the duty of every owner-occupier to spend his time getting away with every single item of maintenance relief he can at the expense of the Inland Revenue.

Mr. Callaghan: Typical Tory philosophy.

Mr. Nabarro: No. It is not a typical Tory philosophy. The law provides that

maintenance relief shall be granted within certain statutory provisions. The Chancellor of the Exchequer has not properly publicised the groups for which reliefs are available. I want him to print these reliefs in the form I have given and see that they are distributed with every assessment for Schedule A in order that the nine out of ten people who are owner-occupiers shall make proper claims.

Mr. Callaghan: The hon. Gentleman ought to be ashamed of yourself.

The Temporary Chairman: Order. The hon. Member must not interrupt unless the other hon. Member gives way.

Mr. Nabarro: I was about to quote from the Daily Telegraph of 7th April, 1960:
Dodgers. The hunt is up against the naughty tax-dodger. Just as naughty in their way are the Commissioners of Inland Revenue. When is the hunt going to be up against them?

Mr. Callaghan: Prince of dodgers.

Mr. Nabarro: As Mr. Nabarro pointed out in his excellent article, Schedule A is 'an illicit collection by the Inland Revenue.'

Mr. Callaghan: "Anything else you can get away with."

Mr. Nabarro: It is a tax levied not really upon those who own houses but upon those who, owning houses, are too naive or too busy or too careless to wriggle out of it.
For every successful tax dodger there must be hundreds of thousands of poor dopes who, from sheer fright, ignorance, confusion or form-blindness, are paying far more tax than they ought. This should be remembered.
I very much approve of those words. It is the fact, as demonstrated by Parliamentary Answers from the Chancellor of the Exchequer, that nine out of ten owner-occupiers are paying this tax largely because maintenance relief is not being claimed.
I cannot bring it home to every taxpayer in the same way as the Chancellor of the Exchequer can, because I do not post a letter once a year or more to every taxpayer in the country. If I did I could include advice along the lines I have mentioned.
Finally there is the political case, resting on Conservative Party philosophy and policy.

Mr. H. Wilson: On a point of order, Sir Samuel. Before the hon. Gentleman drags his speech down to an even lower level, I ask whether it is in order, when he is nominally moving a new Clause, the purpose of which is a removal of a tax, for him to spend all this time making the strongest possible case for the tightening up of the rules, which are obviously so much abused.

The Temporary Chairman: That is not a point of order.

Mr. Nabarro: I am grateful to you, Sir Samuel, for your protection against these bogus points of order.

Mr. Houghton: On a point of Order, Sir Samuel. If I heard aright, you said that the point raised by my hon. Friend the Member for Huyton (Mr. H. Wilson) was not a point of order. I respectfully submit to you that it was a point of order, and that it was for you to rule whether the hon. Member for Kidderminster (Mr. Nabarro) was keeping within the rules of order in devoting so much of his speech in favour of increased allowances for repairs or some such provision, and saying nothing about the purpose of the new Clause, which is the total abolition of Income Tax assessment on owner-occupiers.

Mr. H. Wilson: Further to that point of order, Sir Samuel. I am not sure that my hon. Friend the Member for Sowerby (Mr. Houghton) has exactly got my point. I was not suggesting that the hon. Member for Kidderminster was making a case for further generosity by the Treasury in the matter of the repairs allowance. I said that he was making the strongest possible case for less remissions and less generosity by the Treasury. For that to be enacted would mean imposing a charge on the taxpayers. I am sure that you would be the first to rule that any suggestion for legislation for imposing such a charge would be out of order.

The Temporary Chairman: It does not appear to me that the hon. Member for Kidderminster was out of order. He was not proposing a charge which is not provided for.

Mr. Nabarro: I was saying, when I was interrupted by these bogus points of order, that it is strictly in consonance with Conservative philosophy, which has

been preached by all my hon. Friends and myself for the last ten years, that we invest in a property-owning democracy. We say that everybody should be encouraged to own their own house. A great deal has been done by the Conservative Party towards that end. Building controls have been swept away.

Mr. H. Wilson: What about mortgage rates?

Mr. Nabarro: The standard rate of Income Tax has been reduced over the years from 9s. 6d. to 7s. 9d. in the pound, and up to 100 per cent. mortgages have been granted. Interest rates currently are at about 7 per cent. Of course, the right hon. Member for Huyton, when he talks about interest rates, always conveniently forgets to observe that the mortgage interest—

The Temporary Chairman: Order. I think that the hon. Member is getting away from the new Clause.

Mr. Nabarro: —the mortgage interest is chargeable against the Income Tax liability, and is thus reduced by 7s. 9d. in the pound. There is now only Schedule A Income Tax left, and I suggest to the Chancellor, in view of the impending very heavy increase in rating valuations for houses in 1963, that the convenient time to abolish Income Tax Schedule A would be this year or next year. [An HON. MEMBER: "What about the year after?"] No, not the year after, because the effect of abolition would be twelve months removed from the legislation point.
I do not believe that this form of taxation is logical. It is grossly uneconomic to collect. It is fiscally inequitable. It is anathema to the great majority of my Conservative friends and myself, and as to 90 per cent. it is collected from persons who, were they fully informed as to how to avoid paying it, would be paying practically nothing under Schedule A, as owner-occupiers of houses.
On all those grounds I believe that serious consideration should be given this year to the total withdrawal of Schedule A Income Tax for owner-occupiers, at a cost of about £34 million, calculated from the Chancellor's own figures, given in Parliamentary Answers—£44 million being the gross yield, less


£10 million paid back in maintenance relief, giving a net figure of £34 million. That £34 million would not be available to the Chancellor if only Schedule A taxpayers, as owner-occupiers, were a little more intelligent in the application of their maintenance relief claims.

The Temporary Chairman: Mr. Wade.

Mr. William Ross: On a point of order. I did not hear the hon. Member for Kidderminster (Mr. Nabarro) move his new Clause.

The Temporary Chairman: The hon. Member started his speech by moving the new Clause.

Mr. Ross: He did not.

The Temporary Chairman: The hon. Member will please not contradict me. I distinctly heard him move the new Clause.

Mr. Donald Wade: At the outset I should make it clear that I cannot associate myself with all the observations made by the hon. Member for Kidderminster (Mr. Nabarro). I am concerned with what appears on the Notice Paper. You have indicated, Sir Samuel, that the new Clause—(Abolition of Schedule A income tax)—may be discussed with the new Clause which has been moved by the hon. Member for Kidderminster. The object of the new Clause in the names of my right hon. and learned Friend, my hon. Friends and myself is to achieve the total abolition of Schedule A tax.
There is not a fundamental difference between this and the proposals put forward by the hon. Member for Kidderminster. If Schedule A were abolished the landlords would pay tax on the net rents which they receive. They would be relieved from a considerable amount of inconvenience in paying tax under different Schedules, but the material position would be the same for them. Therefore, whether we advocate the total abolition or abolition in respect of owner-occupiers, the subject is primarily one of owner-occupiers. The new Clause which the hon. Member for Kidderminster has put forward is a step towards total abolition. For that reason I should be prepared to support it and vote for it in the Division Lobby.
But there is another reason why I should be bound to support it. It is a precise replica of a Clause which I moved in 1959. I will not take up time in chaffing the hon. Member for Kidderminster for having voted against it on that occasion, together with 230 of his hon. Friends. We have been over that ground before. I welcome converts, especially if there is evidence that that conversion will be shown in the Division Lobby.
There is not a great deal of original thought which can be brought to bear on this subject. It has been debated on numerous occasions. My colleagues and I have tabled Amendments to it each year since 1956, and have advocated the reform or abolition of Schedule A tax for many years before that. It is my belief that the upholders of the tax are fighting a rearguard action.
The hon. Member for Kidderminster put forward certain objections, and I want to suggest some variations on the same theme. I can summarise the case for the abolition of the tax on three grounds. First, it is antiquated; secondly, it is illogical and, thirdly, it is administratively wasteful—in time, money and energy both on the part of those who collect it and those who pay it.
As to antiquity, it was introduced in 1803, when conditions were entirely different. When Addington's Property and Income Tax Act of 1803 was put on the Statute Book, the benefit of property was one of the chief sources of income. It was more than income from business or from employment, that is to say, from wages or salaries. It was not unreasonable that this benefit from property should have been regarded as something to be taxed, but today the circumstances are entirely different. We have a completely different situation.
11.15 p.m.
If the Chancellor were thinking up a new tax and there were no Schedule A tax, I do not believe for a moment that it would occur to him to put a tax on this notional benefit derived from owner-occupation. It is antiquated and it is also illogical. It is illogical for several reasons. The hon. Member for Kidderminster has already referred to the idea of notional income. It is only notional income as regards certain kinds of property. If I choose to live in a caravan


I do not suffer Schedule A tax. If I choose to live in a houseboat I do not suffer Schedule A tax. I understand that if I have a caravan and take off the wheels and live in it I still do not have to pay Schedule A tax unless it becomes a permanent fixture and part of the realty.
I am aware of some of the arguments put forward from the Treasury Bench. I am aware of the argument that the taxpayer who invests some capital in a house in which he lives might have invested it in an income-producing investment and therefore he ought to be taxed on the income he might have received. That is a very dangerous philosophy. One can imagine the Chancellor chasing up potential taxpayers to see if they invest their money in something which does not produce income and which, if invested otherwise, might have produced income. [An HON. MEMBER: "Mink coats."] Mink coats were referred to last year.
I also recollect Lord Amory's observations in 1959. I can give the actual quotation from the debate on 15th June, 1959, on the new Clause which I moved. He said:
An owner-occupied house may not produce cash income, but it produces the equivalent in the form of freedom from rent"—[OFFICIAL REPORT, 15th June, 1959; Vol. 607. c. 64.]
If he started taxing freedom from rent, the Chancellor would have to chase every tramp and every wandering gipsy. They might become liable for some notional benefit to be derived from freedom from rent. Whether in fact their income would come up to a taxpaying level, is another matter, but in theory that would be the case.
This tax is also illogical because the assessments are out of date. Many of them are many years out of date, whereas in the case of houses built more recently assessments are much more up to date.

Mr. Houghton: rose—

Mr. Wade: I think I know what the hon. Member is about to say.

Mr. Houghton: I am glad that the hon. Gentleman does. If so, he should not be saying what he is about to say. The hon. Member knows that new houses are assessed in harmony with valuations of 1936 and that a modern

house, costing £4,000, may still be assessed, and is assessed, on the value of that house on 1936 values.

Mr. Wade: I am well aware of that point and if the hon. Member for Sowerby (Mr. Houghton) had allowed me to finish my sentence, I should have made that clear. I was pointing out that there are very great variations in assessments although in theory the newer houses are supposed to be based on 1936 values.

Mr. John Barter: If the hon. Member for Huddersfield, West (Mr. Wade) accepts that point, could he explain the position in which I find myself? I live about half a mile from an hon. Friend who has a house which is twice the size of mine. Incidentally, it was built before the war and mine was built after the war. My Schedule A assessment is twice the value of that of the house of my hon. Friend. If there is a Chancellor's concession, whether it has statutory authority or not, there seems to me to be no equity as between one occupier and the other.

Mr. Wade: That is a very fair illustration of the point which I was endeavouring to make. I hope that it has impressed itself clearly on the mind of the hon. Gentleman the Member for Sowerby.
Let us pursue this subject of illogicalities. I say that it is illogical that the owner-occupiers are dependent so far as their liability goes, on these maintenance claims and their ability to fill up the necessary forms. Two years ago it was stated that only one-tenth of the householders concerned make these maintenance claims. I should not go so far as the hon. Member for Kidderminster. I do not think that every owner-occupier—or even a majority—is entitled to full relief. There are many who do not, in fact, spend the required amount. Some are not in a position to do so; and then there are the young married couples who have saved enough to buy a new house if they have been fortunate enough to have found one, and in their case there is not a great deal to spend in the first five years. So, it is not true that everyone would escape the Schedule A tax merely if they knew how to fill up the form.
It is, however, a tax on ignorance and there are many people who fail to get the full benefit because they do not understand the regulations. It is illogical, also, because of the nature of the statutory allowances. Those bear very little relationship to the cost of repairs today. They are quite unrealistic. On the other hand, there are some landlords who spend nothing at all and yet get the benefit of the statutory allowances. That is one of the reasons why I should wish to see this tax abolished. Why should the man who spends nothing get this benefit? Why should he not pay tax on the net rents he receives?
All this ground, I know, has been covered in previous debates on this subject, but are there not new factors? I think that there are two. I am aware of the argument that the man who does not own a house, but who rents a house or a flat, should have some kind of similar relief to that enjoyed by the owner-occupier who is, we hope, to be relieved from Schedule A tax. One must make a distinction between the kind of taxpayer who has £2,000 or £3,000 to invest in income-bearing investments or in property, and the man with less. In the first type of case, if the man puts his money into property, then almost for certain he will pay no Schedule A tax. He will employ an accountant and spend sufficient annually to insure against Schedule A tax. But let us take the man with savings of up to, say, £500. If he puts his money into a house, and we abolish Schedule A tax he will get a benefit, but if he rents a house and puts his money into income-bearing investments, he will get, say, £25 and pay tax on it.
If I were able to move all the proposed new Clauses which the Liberal Party has tabled to this Bill, it would be found that up to £25 of income from all income-bearing investments would be relieved of tax. There would be a broad equity as between the man with savings invested and living in rented occupation and the man owning a small dwelling. That is one new factor. It answers my own concern that we should be fair to the people who rent as well as to the people who own.
There is one other important new factor, of which the Chancellor must be

well aware. That is the new assessments for rating which will come into effect in 1963. There will be a substantial increase in rates for owners of dwelling-houses. There is no doubt about that. What will happen to Schedule A assessments? We cannot go on for ever on the old values. At some time assessments must be brought up to date. If they are brought up to date at the same time as the increase in rates, it will be a very hard knock for those who own their own houses. It will be very serious indeed. We have been told that Schedule A assessments have nothing to do with the new rating assessments. But sooner or later the change will come and it is essential that we should face up to this before the new rating assessments come into effect.
I do not know what Government policy is on this matter, but the combined effect of high interest rates, high land prices, Government policy in taxing building societies, and Schedule A tax, which I regard as an irritant rather than as an actual deterrent to buying a house, is to make the position of the owner-occupier more difficult. We should be told whether that is deliberately part of Government policy. If not and if it is the intention of the Chancellor to assist home buying, now is the time to abolish this irritating and unnecessary Schedule A tax. If it is to be done, let it be done now.

Mr. A. R. Wise: I shall, unfortunately, repeat a great deal of a speech I made on this subject last year, because the tax appears to have altered little in logicality or justice. However, I believe that it will cheer the Committee up if I say that we hope very much that we shall not have a sympathetic answer to the effect that it cannot be done this year for the inevitable reason which has been given so often by my right hon. and learned Friend's two satellites at the Dispatch Box, namely, that it runs contrary to the whole system of the Budget. It has been argued that the Budget is there to check inflation and that this relief of taxation would clearly be inflationary. I have never subscribed, and I will not subscribe, to the idea that leaving money in taxpayers' pockets is inflationary. It is not new money. The only creator of new money is a Government.


The only creator of inflation, as far as I know, is Government expenditure.
I was happy to read in the Press this evening that large administrative economies are apparently contemplated. I hope that they are, because an economy of less than 1 per cent. in Government spending would cover—

Mr. H. Wilson: On a point of order. We are all most anxious to debate the present economic situation and the Chancellor's intentions in this respect, but is it in order in a debate on Schedule A to start arguing the case for a particular economy in the general level of Government expenditure?

The Chairman (Sir Gordon Touche): That is obviously going far beyond the new Clause.

Mr. Wise: The right hon. Gentleman might be a little more generous, seeing that he has debated the economic policy of the Government every time he has spoken, irrespective of its relevance. He should allow a little latitude to this side.

Mr. H. Wilson: That is a criticism of the Chair.

Mr. Wise: The Chair, with the right hon. Gentleman's permission, is capable of looking after itself and needs no assistance from him.
This tax has been illogical from the start. At the beginning of last year I wrote to the Treasury and asked the basis on which the tax was assessed. I was not at all surprised that it took six weeks to get an answer. I was even less surprised when the answer came and said that the Treasury did not know the basis on which it was assessed.
11.30 p.m.
The hon. Member for Huddersfield, West (Mr. Wade) mentioned something about the rise in rating assessment which might have an effect on Schedule A, but it is not based on rating assessment. Indeed, if it were, it might be a little more possible to understand it. As far as I know, it is based on nothing except the whimsy of the local inspector of taxes. A tax of this kind cannot be justified. Furthermore, it is notional, as my hon. Friend the Member for Kidderminster (Mr. Nabarro) said. It is guesswork throughout.
Again, the reliefs, about which we have heard a good deal and from which I hope to derive some valuable hints, are not logical. It is true, as the hon. Member for Sowerby (Mr. Houghton) said, that a man can charge his wife's work. Why cannot he charge his own? Is that less notional?

Mr. Houghton: It is not expenditure of money.

Mr. Wise: Nor is the notional tax an expenditure of money. It is nothing in the least like it. It is just as illogical if a man cannot charge his own work on his house. That would account for a large number of the Schedule A taxpayers who make no claim. It would be only justice to allow them to make such a claim.
Another objection of mine to this tax is that if the taxpayer took the bit between his teeth, he could reduce the Treasury to such chaos by putting in his claims, whether they would be accepted or not, that the tax would be uncollectable and unprofitable. Such a tax is not a sound basis of taxation.
I shall not spend must time on my speech tonight, as a large number of hon. Members wish to speak. I am anxious to hear the fifteenth speech of the hon. Member for Sowerby—

Mr. Nabarro: I am not.

Mr. Wise: —but I urge my right hon. and learned Friend the Chancellor to try to do something about this tax. If he achieves his administrative economies, he will have the money with which he can do this job now. The sum involved is not large; it is £34 million. It is not inflationary, and it would produce a great benefit for a very large number of people.
This is the year in which, ethically, it should be done. Practically, it may be difficult. It should, however, be done two clear years before the rate revision. We have been told that the two things are not connected. Let us disconnect them as thoroughly as we can. We are told that the Schedule A will not be affected by the new rate revision. Very well, there is no need to wait for the new rate revision before doing something about Schedule A tax. It is our only tax which is based on sheer fancy, and the sooner we do without it, the better for all.

Mr. Victor Yates: I had not intended to intervene in this debate but for the remarks that were made by my Front Bench and with which I am in total disagreement. It is a great mistake to assume that this is merely a request that people should be allowed to get away with something to which they are not entitled. Why should not the working man, who suffers from a considerable burden, who has to buy his own house and to spend large sums of his income weekly, as well as use his own labour, in trying to keep the house in a good state of repair, be able, wise enough or willing to make the claim to which he is entitled? The hon. Member for Kidderminster (Mr. Nabarro) was quite right when he said that many people do not know that they can make a claim. I think he also said that some people were probably too idle to do so. I would not agree with that, although there are probably thousands of people who cannot be bothered with asking for receipted bills and reckoning up every item of expenditure on the maintenance of their house.
I do not think it is true to say, as some of my hon. Friends have said, that many owner-occupiers have not enough money to spend to justify a claim being made. I live in a street in Birmingham where I should think the majority of the residents are owner-occupiers. As the hon. Member for Rugby (Mr. Wise) said, why should not a man's labour be taken into consideration? I can give an example of a man who works at the Austin factory. He is extremely skilled: he has built a garage on to his house, he paints and decorates the house, and must have spent many pounds on materials for which he has probably not bothered to get the bills.
I therefore think that this Clause which has been moved by the hon. Member for Kidderminster is reasonable. I do not accept the view that it is Conservative philosophy as against Socialist philosophy. I do not recognise any political philosophy in this matter. I recognise the fact that thousands of men and women have had to buy their own houses, there being no other way of getting accommodation, and that it has been too irksome for many of them to keep these records. This Clause asks for exemption in respect of one house. An owner cannot claim for more than

one house. Therefore, this measure is designed to be fair to the working man who is buying his own house.
One of my hon. Friends referred to the desirability of being fair to people who rent houses. There must be thousands of people who have completely redecorated the municipal houses in which they live in Birmingham. They have spent a great deal of money in doing so, and they should receive consideration.
This is a ridiculous tax, and this Clause is very fair. The Chancellor should do as the hon. Member for Kidderminster has requested and let people know what their rights are in respect of making claims. This has nothing to do with political philosophy, and I shall go into the Lobby in support of this Clause.

Mr. Graham Page: The hon. Member for Birmingham, Ladywood (Mr. V. Yates) has made a powerful plea for the owner-occupier, and particularly for the owner-occupier who "does it himself." The answer of the hon. Member for Sowerby (Mr. Houghton) to my hon. Friend about this was that when a man does it himself it is not a cash expenditure. But he is not being assessed on a cash income; he is being assessed on a notional income, so for that very reason he should be allowed expenditure which is notional expenditure—his own work.

Mr. Houghton: A question was asked and I gave an answer. I did not argue the matter at all. The question was why labour put into redecoration by the owner himself was not allowable. The answer which I gave was, because it was not cost as defined in the Act.

Mr. Page: I take it, then, that I carry the hon. Gentleman with me in thinking that that sort of labour should be charged against Schedule A tax?

Mr. Houghton: I will come to that later.

Mr. Page: We have been given as the total from this tax the figure of £34 million. Of course, it sounds a large sum for the Chancellor to give away or to concede. But I do not think that those who support the abolition of Schedule A tax are called upon to say that the Chancellor does not need this


money. Nor are they called upon—indeed, it would be out of order to do so—to say, if the Chancellor does need this money, the way in which he could get it from some other source.
The case against the Schedule A capital tax stands on its own. It is a bad tax. I deliberately call it a capital tax because it really is not, as far as the owner-occupier is concerned, a tax on income. It is purely a capital tax—not even a capital gains tax. It is a tax on the capital which a man has saved. If the Chancellor says that he must have this £34 million, then I say that he ought to find it from some other source.
As my hon. Friend the Member for Rugby (Mr. Wise) said just now, it is not true that the abolition of Schedule A would be inflationary. It may be said that at this time we ought not to reduce any taxation, when there is such a sickness of the £ and so on, and that we must not be inflationary by removing taxation. But Schedule A tax being a tax on savings, not a tax even on the income from savings, is a disincentive to save and is therefore in itself a cause of inflation.
What is the most common type of saving? It is, of course, the buying of one's own home through a building society mortgage. I should have thought that more was saved that way than by any other single form of saving.

Mr. Nabarro: On a point of order. I have just seen, Sir Gordon, the Patronage Secretary conferring with the shadow Chancellor. Does that suggest that some arrangement is being come to?

The Chairman: Order. That is not a point of order.

Mr. Page: The point which I was endeavouring to make when I was interrupted was that the most common form of saving is to buy one's own home through a building society mortgage. One pays the capital instalments of that mortgage out of taxed earnings. I should think that because it is so inconvenient to withdraw any money from that form of saving it is probably the greatest real way of saving. But as the savings increase by payment of the capital instalments out of taxed income, the Treasury descends upon the saver and taxes the saved capital.
This is not a tax on income because the taxpayer is not receiving any cash income from the item which is taxed. It is a notional, fictitious, imaginary income which is being taxed, not one penny of which the taxpayer sees in cash. He has to produce his 7s. 9d. out of a thin-air pound rather like a conjuror producing a rabbit out of a hat, except, of course, that the conjuror has got a hat. The taxpayer on the other hand, has no income out of which the tax money has to be produced.
11.45 p.m.
The Committee has heard these arguments on previous occasions when new Clauses such as this have been put forward in other years. The subject is becoming rather like a mother-in-law joke on the music halls, but it is no joke; it is a serious matter for the owner-occupiers who have to pay this tax, and it is a serious matter for the principles which this Government were put in office to uphold. This is hardly calculated to encourage of property-owning democracy.
Any owner-occupier who interprets that phrase "property-owning democracy" as owning one's own home finds that he is the only person who suffers double taxation in one country. He is taxed, as the owner of his house, under Schedule A. He is taxed, as the occupier of his house, in general rates. Not only is he the only person who is taxed on his capital, but he is the only person assessed twice on the same item. For a landlord, rates are an allowable deduction from his income from rents, whether the rates are paid by him or paid by his tenant, so in a way he is able to set them off against Schedule A; but the owner-occupier has to pay twice. He pays Schedule 9 and he pays his rates, and rates are not treated in his case as a necessary expenditure in order to earn his notional income.
It really is a "phoney" basis of taxation—that he might put his savings in something out of which he would earn income. That is the argument which is put forward so often to justify Schedule A tax—that he might be earning real income from his savings. He might have put his savings into a car or a caravan or a mink or a mistress, but he would not have been taxed on notional income from any of those commodities.
I ask my right hon. and learned Friend to imagine for one moment that there were no such tax as Schedule A and that he, as a Conservative Chancellor of the Exchequer, was going to impose a tax of this sort. What on earth would his Budget speech read like? What sort of Budget speech would he make in imposing a Schedule A tax on owner-occupiers for the first time? Could he deploy one single argument in favour of this tax if it were a new tax? With what sort of phrases could he, a Conservative, introduce such a tax as this? I hope that we shall hear with what sort of phrases he can announce the abolition of Schedule A.

Mr. Diamond: Anybody who knows the hon. Gentleman the Member for Crosby (Mr. Graham Page) is always glad to hear his speeches and to accept them as serious arguments, and it is because of the argument he has addressed to the Committee that I am anxious to intervene and invite him to consider the matter a little more fully and, I hope, come to the conclusion that his claim for exemption from Schedule A is misplaced.
Let us deal first of all with many of the arguments which have been put forward and which can be dealt with in one sentence only. The majority of the arguments of the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) were directed to the fact that claims are not made correctly, are not properly made, are not fully made, are not sufficiently known. Those arguments are not arguments against Schedule A at all, but merely against the inadequate operation of Schedule A. One can say straight away that, if it be the case that Schedule A does not operate adequately and well, it should do, and it should be encouraged to; but that is no argument against Schedule A.

Mr. Geoffrey Wilson: The hon. Member has the argument the wrong way round. The argument is not that Schedule A is not being properly collected but that people who are entitled to be exempted from Schedule A are not receiving their exemption because they do not understand what the exemptions are.

Mr. Diamond: I am sorry, but the hon. Member has not understood me, I can only repeat that it is no argument

against Schedule A to say that it is not operating fully, accurately and fairly.

Mr. G. Wilson: Why?

Mr. Diamond: It is an argument against Schedule A to say that it is improperly based or is not valid as a method of raising taxation, but most of the arguments in the debate have been adduced to show that allegedly somebody or other does not realise that he is entitled to make a claim. I should be the first to say that in that case the widest publicity should be given to owner-occupiers being entitled to claim. If the maintenance relief claim is complicated—and I do not admit that it is—it should be simplified as far as possible so that no citizen should be called upon to pay more than the proper amount of tax.
The fact is that there is no substantial evidence that the tax is miscarrying considerably. For the sake of administrative convenience and simplicity, many people pay less than they should, and it is alleged that many pay more than they should. I do not know what the difference is, all told. It is certainly the case that many pay less than they should because the Government allow them a greater amount for repairs on their houses than they are able to incur. It is alleged that there are peope who incur larger amounts than they are allowed by the Government but do not claim for that excess because it is complicated to do so or they do not know about it. This may be the case. I can only say from my own experience as a practitioner that there are many cases where one prepares the figures and goes into the claim and one finds that the claim does not lie and therefore it is not submitted.

Mr. Harold Gurden: Does the hon. Member not then agree with his hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates) that the man which uses his own labour, the hard-working man who puts his own work into the house, is not entitled to claim?

Mr. Diamond: That is an entirely different point and would have to be explained more fully. I do not agree with my hon. Friend's conclusions, for reasons which would take a little longer to explain.
All I am saying is that many of the speeches in the debate which have been directed in support of the new Clause have really been directed against the way the tax operates. It is no argument to say that Schedule A does not operate smoothly and therefore we should cut it out. If it does not operate smoothly that is an argument for saying that we should improve it. There is an explanation available for all these minor cases but we should get down to the basis of all this matter.
The new Clause says that there should not be a Schedule A tax on owner-occupiers. I say that there should be, otherwise a great injustice is being done to the tenant. It is very simple. All the complaints, naturally, come from the man who has to pay. The man who is not aware, the tenant, that otherwise he would be suffering an injustice does not complain. He does not make a noise about it because he is not aware of it. We in this House are called upon to ensure that there are fair shares in the responsibility for tax-bearing.
It is well known to the Committee—it has been repeated time and time again, whichever party has occupied the Government Front Bench—as a fact with regard to Schedule A: it is a fact that the tenant pays rent and the Schedule A man, the owner-occupier, does not pay rent. [Interruption.] The hon. Gentleman opposite does not like it put that way. He says that there is a notional income. Let us deal with the simple fact. It is not notional at all. The simple fact which is not notional is that the tenant pays his rent in cash weekly, monthly or whatever it may be. That is a fact. [Interruption.] It is nothing to do with Schedule A and whether it is subsidised or not, and it is not a general case that it is subsidised. The man who has a substantial flat pays his rent, and the owner-occupier of freehold premises does not pay his rent. The hon. Gentleman will say that it is not so—

Mr. Barter: I ask the hon. Gentleman to consider that if his argument were pursued to the logical conclusion, bearing in mind that the valuations on which Schedule A is assessed are based on 1936–37 values, it would result in a revaluation for Schedule A purposes to the extent of three or four times the present values, which would result also

in tax liability substantially in excess of three or four times the present values. Does he accept that as the logical conclusion of his argument?

Mr. Ross: The hon. Gentleman should preface his remarks by referring to England and Wales. The Rating and Valuation Act, 1956, brought all this into force in Scotland, and the first application of it is this year. If the hon. Gentleman wants to know the answer to his own question, he should look at the Finance Act, 1958, in which there was a special Section relating to this very problem.

Mr. Diamond: I am very happy, or unhappy, to confirm what my hon. Friend says.
The interjection by the hon. Gentleman opposite was on a par with so many of the interjections which are made. The logic is as follows: the basis of Schedule A is out of date; Schedule A assessments should be increased; Schedule A owners should be called upon to pay more Schedule A tax; therefore, let us cut out Schedule A.
It is absolutely absurd logic. All the hon. Gentleman is pointing out is that Schedule A is not sufficient. It may be that it is not sufficient; it may be that it is too much. I repeat that I want to get to the principle and get away from all the detail as to whether the assessment is right, too much or too little. If it is wrong, let it be put right. We do not have to argue that here. If it is on an earlier basis, let it be put on a 1964 basis. The hon. Gentleman will not like that because his Schedule A assessment will go up considerably.
The fundamental point is that if one removes Schedule A tax from the owner-occupier, one by that stroke imposes a gross injustice on every tenant. The owner-occupier screams because he knows that he has to pay, and he understands it. But there is something that the hon. Gentleman does not trouble to understand as a Member of Parliament. There is no party point in this. I accept what my hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates) says. The owners of houses are to be found in all income brackets. On both sides of the Committee we are delighted that people should own their own houses. There is no party point


about this; all I am saying is that it is the responsibilty of every hon. Member to have regard also to the position of the tenant. The tenant pays rent, and the owner-occupier does not. To put it the other way, the owner-occupier receives a notional income which the tenant does not. Unless these two are treated fairly there is a gross injustice. If the hon. Member for Kidderminster has his way, the Schedule A man will be relieved of a responsibility which will be put on the backs of the tenants.

Mr. Wise: It is true that the tenant pays rent, but is it not true that the owner-occupier has bought his house and is, therefore, paying what he could have had as income?

12 m.

Mr. Diamond: Of course. That is the whole of the argument. The tenant pays rent. If the tenant had saved the money that the owner-occupier saved and invested in his house and had invested his elsewhere, he would have been receiving income on which he would have been paying tax. What happens with the owner-occupier is a double transaction. He receives the income and pays it back as rent and so no cheque is drawn either way.
One has to compare two men in an identical position, both with the same amount of capital, both acquiring identical houses, one on a rental basis and the other buying the freehold. The difference between the two will be a grave injustice on the tenant if the owner-occupier is relieved from Schedule A.

Mr. Graham Page: As I understand it, what the hon. Member is saying is that the Chancellor must not relieve owner-occupation from tax without also relieving tenant-occupation. The logic of that sort of argument is that one must not take the tax off beer unless one takes it off tobacco.

Mr. Diamond: I am not saying that at all. Take two people in identical circumstances with £2,000 each. One uses the money towards the equity of a house of which he buys the freehold. The other rents the identical neighbouring house and invests the £2,000 and draws income from it. He will be taxed on that income. The owner-occupier

will not pay tax and there will be an injustice between the two taxpayers if the owner-occupier is relieved of his liability.

Mr. T. L. Iremonger: I follow the hon. Member's argument and admit its validity, although I am opposed to it. Would the hon. Member project it a little further? What about the man who pays £2,000 for a caravan?

Mr. Diamond: A pure technicality.

Mr. Iremonger: Injustice as between one and the other.

Mr. Diamond: The hon. Gentleman interrupted me and presumably he wants an answer. He immediately interjected from a sedentary position. If he wants an answer perhaps he will allow me to give it.
The first answer is that it is a technical point and the second is that if it is not a technical point and Schedule A should be strengthened, then let it be strengthened. I am not here to argue that Schedule A works perfectly. If it does not work perfectly let it be improved, but that is not an argument for removing the tax.
What I would say is that there might be some reduction in Schedule A in order to promote saving. If the Chancellor wants to say that he likes people saving in insurance policies and he gives them relief on their premiums and likes people saving with houses and wants to give them relief on their saving, up to a point, to encourage saving, I will be with the Chancellor. But that is a modest means towards saving and has nothing to do with the unsatisfactory way in which Schedule A works.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): I am not getting up now to prevent hon. Members speaking later, but I thought that it would be some help if I were to express my point of view now. I do not necessarily think it may be the last occasion on which I will intervene in this debate.
I listened with great interest to the speech of my hon. Friend the Member for Kidderminster (Mr. Nabarro), a characteristic speech, and with some sympathy to the hon. Member for Huddersfield, West (Mr. Wade). It is very difficult to say anything original on this topic but I will try to put the arguments against the Clause


from my point of view. One argument against the Clause is that the Royal Commission reported against the idea, although I do not say that this is decisive.
I have the Royal Commission quoted to me on a number of occasions, but this was an occasion on which both the majority and the minority agreed against the proposal contained in the new Clause. However, I must in fairness say that they put forward their case for a rejection of this view on the grounds of fiscal principle and not of social policy, and that is an important consideration or gloss to be put upon their view.
The second argument against my hon. Friend the Member for Kidderminster is that the concession would be unfair as between taxpayers. We have 6½ million owner occupiers and 9 million tenants. If this concession were made, there would be a strong demand for a rent allowance. There is quite a strong view, honestly held, that if this concession were made it would be difficult to hold out against such an allowance. For me, in my unpleasant position as controller of the public purse, a rent allowance would mean over £100 million of itself, and we should have to add on the other cost on Schedule A, which would bring the total up to about £150 million. I must keep that sobering consideration in mind.
The other argument against my hon. Friend is that an owner-occupier already has the advantage in that he is taxed on 1936–37 values only, generally speaking. I am aware of what my hon. Friend the Member for Ealing, North (Mr. Barter) said, and I do not think that it is a completely consistent approach to the list, but an attempt has been made to keep the tone of the list in conformity with 1936–37 values. Against that, the owner-occupier may make a maintenance claim on current cost of repairs, so that he has a certain advantage in that respect.
Those are the main arguments against the proposal of my hon. Friend the Member for Kidderminster. The arguments for it are substantial. First, there is the social one, with which I do not think the hon. Member for Gloucester (Mr. Diamond) wholly disagreed. It is

important to encourage house ownership, and any measure to do that is to be approved.
Then there is the idea of notional income. I must admit that I find it somewhat difficult to explain and perhaps difficult to understand. I am not prepared to admit that the idea of notional income is illogical. Certainly it is exceptional and a little difficult to understand. The Royal Commission said:
The witnesses who objected to the charging of tax on the owner-occupiers of dwelling-houses did so on the grounds—

(1) that notional income is not a fit subject for taxation; and
(2) that it is inequitable to tax the beneficial enjoyment of a right of occupation of real property when the income which could, by parity of reasoning, be attributed to the owners of other forms of property (e.g., motor cars) goes untaxed."

My hon. Friend read that out also. His argument was adopted by other of my hon. Friends. I will read out the following passage. I am not sure whether my hon. Friend the Member for Kidderminster read it out.

Mr. Nabarro: My right hon. and learned Friend was laughing so much he did not hear what I said.

Mr. Lloyd: I certainly did not laugh during my hon. Friend's speech. I found no cause for humour in it. The Royal Commission went on:
We think that the first argument ignores the principle that taxation should be adjusted to the relative capacity to pay of the different taxpayers. There can be taxable income which is not received in cash. Living accommodation is a necessity of life and a taxpayer who does not own it is obliged to rent it: consequently an owner-occupier with a given income, paying no rent, has a larger taxable capacity than a tenant with the same income out of which he must meet liability for rent.
That is the argument. I am not sure that I am competent to pronounce upon it, but one of the principles of the tax system is to go on taxable capacity. That is the argument of the Royal Commission.
Another argument which my hon. Friend the Member for Kidderminster urged in favour of his proposal is that the small house owner does not know how to make the maintenance claim, and that only about 10 per cent. of them submit these claims. I am happy to tell my hon. Friend that a new leaflet is coming out in the autumn which will


set out very clearly the circumstances under which people can make these maintenance claims.

Mr. Nabarro: I am delighted to hear that my right hon. and learned Friend is issuing a new leaflet. Will he arrange for a proof to be sent to me in advance, so that I may give him the benefit of my advice on publicity matters, and how we should bring home the facts to these 6 million people? The pieces of dirty, buff-coloured paper of the ordinary Inland Revenue type will not serve that purpose at all.

Mr. Lloyd: I am told that the leaflet will be very explicit and clearly printed, with all the main headings under which claims may be advanced clearly itemised. I cannot say now whether it will be possible for my hon. Friend or even all hon. Members of the Committee to have a preview of the leaflet, but I will consider the possibility. Nevertheless, it is a good thing to have this more explicit, clearly printed form. That will go some way to meet my hon. Friend's point, although I am not certain that there is as much substance in it as he thinks.
The fourth argument is that if all these maintenance claims were made the tax would yield very little. That is quite contrary to the professional advice that I have been given. Even if all the claims that could be made were made, I am advised that the tax would still yield a considerable sum. However this may be, I am trying not to be unfair about this matter. This year, wherever the balance of the argument rests, my view of the new Clause is governed by the consideration that the cost of my hon. Friend's proposal would be £43 million.
The next proposal, put forward by the hon. Member for Huddersfield, West and his hon. Friends, would cost about £47 million net, and I cannot contemplate giving up that amount of revenue this year.

Mr. Barter: My right hon. and learned Friend has referred to the fact that the cost of this proposal, this year, would be £43 million net. Two years ago it was estimated that it would cost £40 million net and last year, I think, it was estimated at £54 million net. Does not that indicate that more claims are being put in at present?

Mr. Lloyd: I do not have the figures for last year at my fingertips—I was then occupying a different position. All I can deal with is what my advisers have given me this year, and their advice is that it would cost £43 million net. I cannot contemplate giving up that amount of money this year.
Having said that—and I hope that my hon. Friends will accept the position—the question arises about the future. I would have thought that the proper course would be to deal with the matter in connection with the 1963 revaluation. The new rating valuation comes into force for England and Wales in April, 1963. We shall require specific legislation in the Finance Bill of that year to empower us to use the new valuations for Schedule A purposes, because the present Rating and Valuation Bill empowers us to use them only for rating purposes. We shall require legislation in the Finance Bill to allow us to use them for Schedule A purposes, and that is the time to have a debate on this matter. We shall then know the actual figures on current values.
I cannot now pronounce upon what will be the priorities which should have tax relief, or whether there is something in the idea, put forward by the Opposition last year, to have a relief up to a level of £15, or the idea put forward by the Commission which advised the Irish Government, which was an upper limit of £30. I cannot pronounce at this stage upon what is the right way to deal with this problem. I admit that there is a problem, and it is important to try to increase the incentives to house ownership. But it is not practical to try to come to a decision at present.
I cannot accept a proposition to give up £43 million of revenue this year. That being so, it seems logical and sensible to consider the matter when we have to legislate in connection with the new rating valuations. In the circumstances, I hope that my hon. Friends will accept the position. I submit, with great respect, that it would be unreasonable and somewhat unrealistic for those who have supported the general lines of my Budget to press the new Clause.

Mr. Houghton: Mr. Houghton rose—

Mr. Nabarro: Not again! The hon. Member has made about fourteen speeches today.

12.15 a.m.

Mr. Houghton: I thought it might be for the convenience of the Committee if I followed the right hon. and learned Gentleman and gave the point of view from these benches. I have no desire, any more than the Chancellor had, of bringing this debate to a premature conclusion. I am quite prepared to go on discussing this matter until breakfast time so long as the Committee thinks it profitable to do so. What I am about to say need not discourage any hon. Members on either side of the Committee from continuing the debate. Nor would it rule out the possibility that my right hon. Friend the Member for Huyton (Mr. H. Wilson) might himself wish to intervene later if the debate continues for a reasonable time. I think that is being fair all round. I hope that the murmurs of disapproval are now quietened and that we can proceed with an examination of this important matter.
I say this to my hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates). I ask him to contrast the attendance and the passion shown by hon. Members on the benches opposite on this new Clause with what we experienced earlier in this Committee when we were trying to get the smallest reliefs for old people on small incomes and others on small incomes. The age exemption for the poorest taxpayer would have cost £3¼ million, but it was rejected by the Chancellor and it received little or no support from the benches opposite.

Mr. Wise: On a point of order, Sir Gordon. Would it be possible for you to persuade the hon. Member for Sowerby (Mr. Houghton) to come somewhere near to this new Clause?

The Chairman: I think that the remarks of the hon. Member for Sowerby (Mr. Houghton) were a passing reference to a previous Amendment.

Mr. Houghton: Thank you, Sir Gordon. It was only a passing reference because I have hardly begun my speech. Since my hon. Friend the Member for Ladywood made a contribution to the debate and announced his intention of going into the Division Lobby in support of this new Clause, I thought it appropriate for me to make a few observations about what I believe to be

fundamental to this debate—that we are now hearing Tory philosophy. This is political. As the hon. Member for Crosby (Mr. Graham Page) said, this is what the Tories were elected for.

Mr. Nabarro: A property-owning democracy.

Mr. Houghton: The Tories were not elected to give the aged relief. The Tories were not elected to give those on small incomes relief. They were elected to sweep away, lock, stock and barrel, Schedule A tax on owner-occupiers.

Mr. Charles Loughlin: Before my hon. Friend proceeds on this—

Mr. Houghton: Let me proceed a little further, if I may, with my argument.

Mr. V. Yates: My hon. Friend the Member for Sowerby (Mr. Houghton) assumes that I am not aware of all those other humanitarian objectives, which I fully support, but that does not justify refusing to hear an argument that is distinctly in favour of assistance to the working man buying his house. [HON. MEMBERS: "Hear, hear."]

Mr. Houghton: I hope that my hon. Friend is suitably encouraged by the reception of his remarks by hon. Members on the benches opposite.

Mr. Nabarro: Cheer up.

Mr. Houghton: They are not interested in the working man buying his house. They are interested in giving Schedule A reliefs to people in the Surtax range. Will any hon. Member opposite deny that a substantial benefit would be added to the Surtax payer by this new Clause? Of course it would.

Mr. Wise: Mr. Wise rose—

Mr. Houghton: I am not giving way to the hon. Member.

Mr. Wise: The hon. Member asked a question.

Mr. Houghton: I am asking a question because I know the answer.

Mr. Nabarro: The hon. Member for Sowerby is a Surtax payer himself.

Mr. Houghton: I have no objection to admitting that I am Surtax payer, but I have fought as hard as anyone against the proposals in this Bill for Surtax


payers. I do so on principle and against my own interests. Before there is any comment on it, I will also tell the Committee that I am also an owner-occupier and I fight against the wholesale proposal which the hon. Member for Kidderminster (Mr. Nabarro) made.

Mr. Nabarro: Does the hon. Member pay Schedule A tax?

Mr. Houghton: Last year—[An HON. MEMBER: "Not this year? The hon. Gentleman lives in a caravan."]

Mr. Nabarro: Or a houseboat.

Mr. Houghton: I thought that this was going to be one of the most serious of our debates on the Finance Bill. This is the only proposed new Clause for which right hon. and hon. Members opposite have shown any enthusiasm, apart from one to relieve the horticultural industry from the impact of the tax on heavy oils. They should surely be prepared to listen to a reasoned case against the unreasoned and disgraceful speech of the hon. Member for Kidderminster. He does no credit to his knowledge and intelligence by engaging in the bombast and exhibitionism which he displayed when he moved this new Clause. I would tell him that the longer he is in the House, the more intolerable is his behaviour on occasion. He should treat the House and this Committee a little more seriously than when he moved this new Clause.

Mr. Nabarro: I am humiliated deeply.

Mr. Houghton: In 1959, when the Liberal Party moved a similar new Clause on the Finance Bill of that year, my right hon. and hon. Friends abstained from voting when the matter went to a Division.
Last year, as I was about to say, we decided to support a new Clause in the name of the hon. Member for Loughborough (Mr. Cronin) and other hon. Members, which was designed to give exemption to owner-occupied houses up to the first £15 of net annual value. This proposal which we made last year sought to give to the owner-occupier who had invested his savings, or his money, whether savings or not, in a house, a concession similar to that given to those with money in the Post Office Savings

Bank or a trustee savings bank, where interest up to the first £15 is exempt from the incidence of Income Tax, but not Surtax. That debate was on 21st June, exactly a year ago, and that was when the then Chancellor made the statement, part of which the hon. Member for Kidderminster quoted in his speech.
Our proposal last year was, in fact, a copy from a proposal made by the Tax Commission in the Republic of Ireland, where there was a Commission similar to our Royal Commission; but, whereas our Royal Commission recommended unanimously in favour of retaining the Schedule A tax on owner-occupiers, the Irish Commission recommended that Schedule A tax on owner-occupiers should be exempt up to the first £30 of annual value of dwelling-houses. I should explain that that was only in respect of one dwelling-house of one taxpayer. In the Republic of Ireland that was a concession comparable with their own version of exemption of Post Office and trustee savings bank interest from Income Tax. Their limit is not £15, but £30. The Tax Commission in the Republic of Ireland, which has an Irish name which I cannot possibly pronounce, made a recommendation on those lines. We thought that that principle should receive the careful and favourable consideration of the Committee. That is why we supported it last year.
This year there were other matters which we decided to press upon the Chancellor more strongly than the new Clause on Schedule A which we brought up last year. In particular, we felt most strongly and deeply about additional personal reliefs to hard-pressed sections of our smaller taxpayers. Our pleas fell upon deaf ears on the benches opposite, and the Chancellor felt unable to concede them because of their cost.
There have been many irrelevancies and inaccuracies in the course of the debate so far. I shall say something about them. I do not believe that a large proportion of owner-occupiers who do not make maintenance claims fail to make them on account of ignorance. The hon. Member for Kidderminster is quite convinced that many more claims could be made to extinguish Schedule A assessments if only the taxpayers concerned knew their rights. I do not believe that. The hon. Member claims that he has


publicised, as he has, the right to claim where the cost of repairs exceeds the statutory allowance when the expenditure is averaged over the preceding five years. I hope that I shall be forgiven for mentioning that I did a regular weekly broadcast from 1940 to the time I entered the House of Commons in 1949. I broadcast on this very issue time and time and time again. [Interruption.] I think that the hon. Gentleman must draw certain conclusions from that, as he must from the results of his own attempts at publicising this relief.
The truth is that only about 10 per cent. of owner-occupiers are making claims for relief at present. About 90,000 new claims are made each year, which is a very small increase in the number of claims. Having regard to the 6,000,000 owner-occupiers who make no claim at all, 90,000 a year is a very small increase in the number of claims. I do not believe that this small increase in the number of claims derives from lack of information about the rights of the taxpayer. I agree that there may be something in it, but not as much as the hon. Member for Kidderminster claims.
Another aspect which the hon. Member for Kidderminster overlooked is that not all taxpayers are in his position. He has so much money to spend that he can deploy his expenditure on his house and his tennis court in such a way as to get the maximum benefit from his Schedule A tax. I do not condemn him for that, but many taxpayers would envy the resources he has to deploy in this way. Many taxpayers have not the money to do that.
12.30 a.m.
The hon. Member should bear in mind also that since this expenditure must be averaged over five years, it takes an expenditure of £200 over five years to extinguish an assessment of £40 a year. Two hundred pounds in five years on a house of a relatively small assessment like that is a fairly high level of expenditure for the ordinary owner-occupier to undertake.

Mr. Nabarro: Yes, but the average owner-occupier paints his house, inside and outside, every four years. That is the acclaimed average. That occupies the greater part of the £200, provided that he does not do it himself. Under

the existing law, he cannot charge it if he does it himself. But normal repairs to a four-bedroom semi-detached house over a period of five years would cost more than £200.

Mr. Houghton: I leave the matter by saying, as my hon. Friend the Member for Gloucester (Mr. Diamond) said, that many of the 6 million owner-occupiers do not have money to spare on inessential decorations and repairs. [Interruption.]

Mr. Loughlin: On a point of order. I heard the hon. Member for Kidderminster (Mr. Nabarro) state that I live in a council house. I wish to make it clear that I do not live in a council house.

The Temporary Chairman (Mr. W. R. Williams): That might be so, but I do not see that it is a point of order.

Mr. Houghton: Another contributory reason for many taxpayers not being able to make a claim is the "Do-it-yourself" campaign for home decoration, which is becoming increasingly attractive to many owner-occupiers because of the rising expense of professional redecoration. There is a point there which, in any event, should receive the consideration of the Chancellor, whether some part of the assumed cost—since we are dealing with notional income, we can deal within reason with notional expenditure—should be allowed where the owner-occupier undertakes his own repairs.
An owner-occupier can, of course, charge—this deals with a point raised by my hon. Friend the Member for Ladywood—the cost of all materials used, although, at present, he cannot charge the notional cost of his labour. The difficulty about that is to assess the notional cost of an owner-occupier's own labour. In the case of a wife, evidence is usually required of an actual payment. Moreover, the taxpayer is required to include on his tax return the income that he pays to his wife. It is not so easy, however, in the case of the taxpayer himself.
Another thing that must not be overlooked is that many owner-occupiers are exempt from tax, either on account of their personal circumstances—a wife and family, for example—or on account of interest payments or mortagages, or both. A great many owner-occupiers


are not liable to tax at all. It would be worth while finding out how many taxpayers are exempt altogether from Schedule A on that account.
Another factor which is worth taking into account is that there are some millions of new houses in the total of 6½ million for which the repair bills up to the present are fairly light. The occupants went into the houses in a new condition with initial repairs and decorations completed. Deterioration has not yet set in and, on the whole, their repair burden will be light for some years—at least, we hope so. That is a more fairly balanced explanation of the numbers who do not make maintenance claims than the explanation give by the hon. Member for Kidderminster, although I welcome, with him, the annoucement by the Chancellor that something clearer and more specific is to be issued in the autumn so that taxpayers should be in no doubt.
I have drawn attention in past debates to the absence of any indication to the taxpayer if he does not receive a Schedule A demand note, as many taxpayers do not, because their Schedule A assessment is worked into their Pay-as-you earn coding, it is paid along with P.A.Y.E. and there is no separate collection of Schedule A tax. But to bring this to the attention of those concerned will certainly be a great advantage.
Another factor—since we are dealing with this matter exhaustively now—is that the amount of relief which any taxpayer can get is limited by the amount of the assessment on his property. Only in the case of farm buildings can a repairs allowance exceed the assessment on the property itself. On dwelling-houses, no matter what the average expenditure may be, the maximum relief is the difference between the statutory repairs allowance and the gross Schedule A assessment. It can mean that in the case of a house assessed at £50 gross the maximum relief which a taxpayer who is paying at the lowest rate of Income Tax would get would be £30 at 1s. 9d. which would be only 52s. 6d. One can quite understand that many taxpayers, even those in the low income groups, might feel that it is scarcely worth while going to a lot of trouble to get a repayment of 52s. 6d.
Even at the maximum rate of 7s. 9d.—and the hon. Gentleman was very free indeed in quoting the standard rate in his references when, in fact, many owner-occupiers are not liable to the standard rate at all and the relief that they can get is correspondingly smaller—the amount of relief that those liable at the top rate would get in a year for an average of expenditure over the preceding five years would be £11 12s. 6d. All those factors taken into account explain why the number of claims is not larger than it is.
But if the Chancellor's leaflet is as good as we hope it will be, with or without the help of the hon. Member for Kidderminster, it should put this matter beyond any further doubt, because taxpayers will know, and if they do not claim we can assume that there are reasons other than ignorance, at all events, which are preventing them from doing so.
I had better warn hon. Members opposite that I shall be at least another half hour. I am going to deal with this matter very thoroughly indeed. Hon. Members opposite started it and I am prepared to go on with it. Therefore, hon. Members who are not disposed to stay any longer can leave. After the speeches that have been made on the benches opposite and in view of the speeches which apparently still have to be made from those benches, I think our point of view should be thoroughly and fairly put.
I think that I may leave the question of why people do not make more claims for maintenance relief. I would, however, add this observation. I think that one of the Chancellor's difficulties may be that in many cases the reliefs given as a matter of practice by the Inland Revenue are questionable in law. What does the Act say? It says that this expenditure must be for the purpose of maintaining the property in a condition to command the existing rent.
That means that the expenditure should be just as much as, and no more than, is necessary to keep the property in good repair to command its rental value. I think one could argue that that does not run to the white lines on tennis courts. I think it could be argued, in fact, that much expenditure which is admitted in practice is going rather


outside the strict definition of the Act. However, I am not complaining. I am merely saying that in looking at this matter some owner-occupiers have reason to be more grateful than others for the amount of expenditure and the kind of expenditure admitted for Income Tax purposes.
I now come to the question of abolition. Abolition, as this new Clause puts it forward, is complete abolition of Schedule A assessments on owner-occupied dwelling-houses. But it restricts such exemption to one house per taxpayer. I would just ask in passing, not as a debating point but as a matter of logic, that if it is wrong to tax notional expenditure for one house, is it not equally wrong to tax notional expenditure for the second? That seems to be a weakness in the presentation of the case by the hon. Member for Kidderminster. Presumably notional income from owner-occupied business premises will continue to be taxed, though, of course, the amount of tax paid is set off against business profits. Notional income from owner-occupied business premises will continue to be taxed if the new Clause is adopted, and that, I think, must to some extent destroy the passionate opposition to the taxation of notional revenue.
As regards rents receivable by landlords for tenanted properties, as my hon. Friend the Member for Gloucester pointed out, they would continue to be taxed either under Schedule A, as at present, or under Schedule D, on actual receipts less outgoings. That is a matter that would have to be dealt with as a consequence of abolishing assessments on owner-occupied dwelling-houses.
The main case for abolition seems to rest upon two grounds. The first is that to tax notional income is wrong in principle because it is not true income and does not provide any fund out of which tax can be paid. On that I pointed out in an intervention when the hon. Member for Kidderminster was speaking that we do, in fact, tax notional income now. We tax notional income when a landlord gives beneficial occupation of a house to a relative or other person. He is not allowed to get away with an assessment of the property on the actual beneficial rent which he receives.

He is taxed on the full value, irrespective of whether he receives it in rent or not. That is taxation of notional income. It is treated as a gift to the occupier, although he never receives the money.
Furthermore, under what is left of Schedule B, the taxation of the occupation of land, there is still taxation of notional income because, irrespective of whether the land is utilised or not, Income Tax is payable. I agree that that is a comparatively small matter, but I would draw attention also to the taxation of notional income under the Finance Act, 1948, in the case of all directors and executives in receipt of over £2,000 a year who receive amenities, the services of servants, the occupation of flats or other accommodation. Anything that can be translated into money value, even though it may not be convertible into cash by the taxpayer, is added back to his assessment under the Cripps changes in 1948 in order to check tax avoidance by the receipt of more and more benefits in kind.
I understand that the taxation of notional income of owner-occupiers is not peculiar to this country or to the Irish Republic. Provisions akin to it exist in tax systems in France, Finland, Austria, the Netherlands, Norway, Sweden, Denmark, and also in India, Pakistan and Ceylon. That shows that this basic need for accommodation of every citizen occupies a special position in the tax laws of these countries.
The second ground upon which the case for abolition rests is the one that have already dealt with at some length, namely, that if only all owner-occupiers knew of their rights there would be no Schedule A assessments because they would all be extinguished by maintenance claims. There can be, of course, a third argument, which is not a taxation argument but a social one, that concessions which encourage home ownership are a good thing, however illogical they may be from the point of view of taxation.
12.45 a.m.
I referred earlier to the new Clause which we proposed last year based on a recommendation made by the tax Commission in the Republic of Ireland. The Committee may be interested to know that the Government of the Republic of


Ireland totally rejected the recommendations of their tax Commission. In our case the Radcliffe Commission recommended the retention of Schedule A on owner-occupiers. This new Clause seeks to upset that. In the Republic of Ireland the tax Commission recommended in the opposite sense, and the Government there rejected its proposals.
They have issued a White Paper, which, in typical Irish fashion, happens to be buff, but it is worth the while of hon. Members to study this, and if there is not a copy in the Library I shall be very happy to put one there, because, although what is done in the Republic of Ireland need not necessarily govern what we do here, it is nevertheless interesting to see that the arguments which have been used there by the Government of the Republic of Ireland follow very closely indeed the recommendations of our own Royal Commission. They deny that there is a case for abolition even up to £30 limit and they say that the owner-occupier enjoys a very real financial benefit as compared with taxpayers of equal income still subject to the inescapable burden of rent.
Here let me say that the Chancellor is perfectly right when he says that concessions given to owner-occupiers would be bound to raise the question of some relief to those who are now paying higher and higher rents as the direct result of the Rent Acts passed by hon. and right hon. Gentlemen opposite. There is not the slightest doubt that the tenant, who is paying what in many cases is now a high if not an exorbitant rent, would feel at a great disadvantage compared with the owner-occupier who will have a capital asset at the end of the day and who in the meantime is probably not paying in total as much for his house as the person in tenanted property, because many taxpayers who have taken out mortgages are, of course, receiving tax relief on the mortgage interest paid.
The Government of the Republic of Ireland mentioned this very question of the rent relief which would be quite strongly pressed if the proposed exemption were granted. They deal with the question of notional income and they deal with the question of social policy, and they suggest that home ownership is being and should continue to be encouraged

by means which benefit all concerned and not only those with Income Tax liability.
We must not overlook the fact that some millions of owner-occupiers have no tax liability, and this new Clause would not benefit them in the slightest; but some of the other reliefs which we proposed earlier would have benefited them. Here we find that on the benches opposite concentration is being made on this as if it were a top priority.

Mr. Nabarro: A very important one.

Mr. Houghton: I come to the Chancellor's statement which, if I may say so, left this matter still in an unsatisfactory position. He really repeated what had been said by his predecessor last year.
The Chancellor ought to say a little more about this tax as a tax. He seemed to suggest that this is something which could not be considered this year anyhow and therefore it was scarcely worth giving real attention to the merits of the case. He listed the points in favour of the new Clause and the points against it, which would seem to be an echo of what the noble Lord, Lord Amory said last year when he stated:
I would sum up by saying that I think there are strong arguments both for and against relief from Schedule A for owner-occupiers…We ought all to think over very carefully and weigh up all the arguments for and against, so that we shall avoid the risk of oversimplifying what is a much more complicated and difficult issue than appears at first sight, and so be in a position to form a considered view at an appropriate time."—[OFFICIAL REPORT, 21st June, 1960; Vol. 625, c. 267.]
That was all very well as the swan song of a Chancellor giving up, but scarcely the sort of approach to be justified by a Chancellor just taking over. The right hon. and learned Gentleman should give a more positive view on whether or not he wishes to retain the tax in his fiscal armoury.
I grant the Chancellor that in 1963 it will be necessary for Parliament, the Government and everyone concerned to address themselves to the problem afresh, though it does not necessarily follow that even if Schedule A valuations have to be brought up to date the amount of tax payable by owner-occupiers under Schedule A would be higher.
The Minister of Housing and Local Government is taking powers in the Rating and Valuation Bill to abate the new valuations in different areas by differing amounts at his discretion, by Order laid on the Table of the House. It would be equally possible to have the Schedule A tax abated in order that the amount should be no higher after the new assessments than before. I mention that only to disprove the assertion made from the benches opposite that because valuations go up Schedule A tax must necessarily go up as well.
The Chancellor might find a new and more stable basis for the payment of Schedule A tax by owner-occupiers if he did not feel that it was equitable to exempt them altogether. There are various possibilities open to him. But what the right hon. and learned Gentleman has not said, any more than did his predecessor, is whether he regards it as equitable against the background of our present taxation to exempt owner-occupiers altogether on the values of all sorts of accommodation. It is important that he should say it. I draw the Committee's attention to the fact that there are 71,000 dwelling-houses assessed at more than £100 a year. Is it proposed in the new Clause that they should be totally exempt from Schedule A?

Mr. Nabarro: Why not?

Mr. Houghton: I am asking whether this proposal goes the whole way and does not limit the amount of exemption in any way.
When one looks at values it is curious to find that out of 13,230,000 dwellings assessed at present, fewer than 700,000 have a valuation of more than £50 a year. This shows how low the valuations now are. Over 12 million of the valuations are below £50 and on present valuations the amount of reliefs is correspondingly small. My conclusion is that we do not agree with the wholesale exemption of the owner-occupier from Schedule A tax. The farthest we could go was the new Clause that we tabled last year to link up savings in house ownership with savings in the Post Office and the trustee savings banks; that is, by the £15 a year. We thought that was logical. We thought that that would be fair, although a proposal corresponding to this

in principle has been rejected by the Government of the Republic of Ireland.
But in the context of this Budget, and having regard to the complete rejection of all the attempts that we have made to get small reliefs for small taxpayers, we certainly could not agree, at a time when large-scale reliefs are being given to Surtax payers and no reliefs lower down, to the Chancellor giving up another £40 million of revenue for the benefit of exempting all owner-occupiers in respect of Schedule A on their houses irrespective of their value.

Mr. H. Wilson: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
I do this, Mr. Williams, in order to find out the Government's intentions about the rest of tonight's work. It is about time this question was asked. [Interruption.] The position, as I understand it, is that the Government hope to complete the Committee stage of the Bill by seven o'clock tomorrow evening. We for our part have said that we will co-operate to that end. I do not know whether the Chancellor and his colleagues, still less those who sit behind them, have worked out what is involved in seeking to do this, nor do I think they have measured the rate of progress that we have been making towards it.
The position is that if we are to begin at a reasonable stage on the Order Paper tomorrow so that we can get through the business that is on the Order Paper before seven o'clock, which I am sure we all want to do, we have to make a great deal of progress tonight. I want to make it quite plain to the hon. Member for Kidderminster (Mr. Nabarro)—who, having made his speech, has been sitting there acting the fool ever since while my hon. Friend the Member for Sowerby (Mr. Houghton) has been trying to speak—and to his colleagues that we are not going to pull out our Amendments at 6.30 p.m. tomorrow in order to let the Chancellor get his Bill by seven o'clock. We do not intend to sit now hour after hour listening to hon. Gentlemen opposite talking on this Clause and adjourn at a reasonable hour and then tomorrow afternoon have to pull out some new Clauses to which we attach importance in order that the Chancellor can get his Bill by seven o'clock. Consequently, it is time that some serious


thinking was done on the Conservative side of the Committee.
One solution might be that the idea of getting the Bill by seven o'clock tomorrow should be dropped. We have said that we will co-operate, and we will do so, but we will not co-operate to the extent of pulling out our Amendments so that Conservative back benchers can talk longer on their Amendments. It would be unreasonable to expect any Opposition to do that, and we are not going to do it.
Another solution is that some restraint should be shown in the matter of the debate, which has now been going on for two and a half hours. We do not want in any way to interfere with the rights of hon. Members opposite. They have as much right as anyone else to move Amendments to the Finance Bill. They were not slow to avail themselves of their right during the early stages of the Bill. They have had more Amendments tabled to the Bill than the official Opposition have. Over the greater part of the Committee stage of the Bill the Conservative benches have been much worse attended than have the Opposition benches. The only questions which have brought hon. Gentlemen opposite into the Committee have been directors' cars, the Surtax concession and Schedule A.

Hon. Members: And fuel oil.

Mr. Wilson: Yes, and fuel oil. Otherwise the Conservative benches have been very much depopulated.
If the Government are adamant about getting the Bill by seven o'clock tomorrow—they are perfectly entitled to ask that, and we have undertaken to co-operate—we ought to make much faster progress tonight than we look like making at the present time. If we are to start tomorrow at a point which will enable us to get through all the Amendments due to be called by seven o'clock at a reasonable speed and with a certain amount of voting, we have to get through five more new Clauses tonight.
1.0 a.m.
Some of them are very important ones. After Schedule A—and no-one underrates the importance of this Clause, apart from some hon. Members opposite who would not give an intelligent

hearing to my hon. Friend—there is an important new Clause in the name of the Liberal Party—(Capital allowances). This raises the whole question of investment in British industry. It is an extremely important new Clause on which I should feel perfectly able to speak for a full hour without pausing for breath, as I did on a similar amendment three years ago.
Before that there is another new Clause—(Income tax: non-ferrous metal mines in United Kingdom). Then there is a new Clause I would hope we could go through rather quickly—(Sweets used for making wine vinegar). Then there is another important one—(Overseas Trade Corporations). I do not think much of it myself, but no doubt the hon. Member who wants to move it thinks it very important. Then there is another—(Excise duty on strengthened cider and perry).
To achieve this new Clause tonight is the absolute minimum if the Patronage Secretary is to get this Bill by seven o'clock tomorrow and to leave adequate time for debate. I have mentioned five or six new Clauses that will have to be got through tonight. I am not giving away any secrets when I tell the Committee that since 3.30 yesterday we have got through exactly five new Clauses. We are about half-way through the work we set out to do at that time. I should like to know from the Chancellor exactly how he conceives this is to be done. The eleven Socialists are perfectly capable of speaking very fully on all these Clauses.
To my mind the Schedule A debate has been pretty fully covered. The arguments have been covered. I know that there are a number of hon. Members who want to speak, because they intend to vote and they have to justify their intention to vote against the Government. Some are not going to vote but they think it important that they should demonstrate to their constituents what firm supporters they are of Schedule A abolition.
We have pretty well exhausted the arguments on this. If it is desired that we should go on, many of my hon. Friends intend to speak. So far, I have tried to restrain their desire, too much it is thought by some of them. I want to give notice to the Conservative Party that if they want to go on with this


matter we are not just going to sit and listen to speeches by the hon. Member for Kidderminster and his hon. Friends. That had better be understood.
Do the Government still intend to get this Bill by seven o'clock tomorrow? If so, what do they intend to do to bring this present debate to a conclusion and what do they intend to do to get through the rest of the night's business with reasonable dispatch. We are going to play our full part in debate if hon. Gentlemen opposite intend to do the same.

Mr. Selwyn Lloyd: I am not going to attempt to add any element of controversy or comment at length on speeches made from the other side of the Committee. I think that it is quite true that there has been a measure of co-operation up to now in trying to get through this Committee stage. I do not think that we should be altogether ashamed of the fact that there should be an element of co-operation to get through the Bill reasonably.
I would hope very much that we can get the Bill by seven o'clock tomorrow and that really does mean, in my view, getting to the new Clause—(Relief for industrial use of light oils). I ask my hon. Friends and hon. Members opposite to co-operate to that end.

Mr. Iremonger: I am sure that Members on both sides of the Committee will appreciate the spirit in which my right hon. and learned Friend the Chancellor replied to the right hon. Member for Huyton (Mr. H. Wilson), and I shall certainly do all I can to assist him, but I could not pass from the Motion without saying that the mixture of arrogance and humbug which we heard would have been surprising if it had not come from the right hon. Member for Huyton.
I merely rise to say that I support my hon. Friend the Member for Kidderminster (Mr. Nabarro). I have a certain sympathy at this moment with—I think it was he—Lord Byron, who said that he liked a Parliamentary debate, particularly when it was not too late. I am sure that this one will not become any later because of my intervention.

The Temporary Chairman (Mr. W. R. Williams): Order. We are not dealing with the new Clause but with the Motion,

That the Chairman do report progress and ask leave to sit again.

Mr. Iremonger: I apologise, Mr. Williams, both to you and to the Committee. I was under a misapprehension.

Mr. Ross: We have not had a satisfactory indication from the Chancellor as to how long he thinks these proceedings will go. Many of us have been restraining ourselves not only in relation to the new Clause of the hon. Member for Kidderminster (Mr. Nabarro), but in relation to previous ones. There was a very important one about shale oil in Scotland and many of us, from the point of view of achieving that co-operation to which the right hon. and learned Gentleman referred, left undelivered speeches which would have been helpful.
Before we proceed we should have an indication from the Chancellor about the Government's intentions. How long does he think we should go on? Does he think that the Committee will sit until about seven a.m. to deal with these new Clauses and then resume later in the day? Before we withdraw the Motion and resume the other business we should have an indication from him or the Patronage Secretary about further consideration of the hon. Member for Kidderminster's new Clause. It is not good enough merely to say there has been a measure of co-operation. The co-operation has been on this side of the Committee.

Mr. Wise: Nonsense.

Mr. Ross: What I am saying is quite true.

Mr. Wise: More time has been occupied by Members opposite than by Members on this side of the Committee.

Mr. Ross: In relation to the debate on Schedule A, that is just not true. Indeed, it is within our memories that the hon. Member for Kidderminster opened the debate at about twenty minutes to eleven.

Mr. Nabarro: To be precise, it was 10.38 p.m.

Mr. Ross: We are glad of that unusual precision from the hon. Gentleman, but we should have some precision from the Chancellor about the Government's intentions.

Mr. Selwyn Lloyd: I think that it is important, if we can, to keep an element of humour in this situation. I have listened very patiently for a considerable portinon of the Committee stage of this Bill, and some very rude things have been said about me without my taking great hurt. The best thing now is, with commonsense, to get on. I have indicated how far we should go. I think that my hon. Friends will pay some attention to what I say. I hope that the right hon. Member for Huyton (Mr. H. Wilson) will withdraw his Motion so that we can get on.

Mr. H. Wilson: I am prepared to consider withdrawing my Motion only when we get some clear indication of what the programme is for tonight. We have got no indication of this, particularly from hon. Members below the Gangway opposite. The suggestion that it is hon. Members on this side of the Committee who have been holding up the debate is thoroughly unjustified. Hon. Members opposite know that without the co-operation that we have shown throughout the proceedings on the Bill we should not have been near even Clause 25 tonight, let alone discussing new Clauses. Time and time again I have appealed to my hon. Friends not to speak, and hon. Members opposite not to rise.
For the hon. Member for Ilford, North (Mr. Iremonger) to make the statement he did was quite unjustified. His was the kind of remark which was likely to make it more difficult for me to appeal to my hon. Friends to have any restraint whatsoever in debating the Motion to report Progress. A number of my hon. Friends have sat here for two-and-a-half hours without saying a word. They are only too anxious to speak, not only on the new Clauses but also on this Motion, and they will not show restraint if more remarks are made of the kind made by the hon. Member for Ilford, North, or the hon. Member for Rugby (Mr. Wise) who complained that Members of Her Majesty's Opposition had the nerve even to speak at all.

Mr. Wise: I made no complaint. I know that nothing on earth would stop hon. Members opposite from talking if they wanted to. I was drawing attention to the fact that more time in this debate had been occupied by hon. Members

opposite than by hon. Members on this side of the Committee.

Mr. Wilson: That just is not true. If the hon. Member will look at the list of hon. Members who have spoken since the beginning of the Schedule A debate he will see that a great deal more has been said from his side of the Committee. There has been one fairly lengthy speech from this side, by my hon. Friend the Member for Sowerby (Mr. Houghton) who knows about twenty times as much about Schedule A as the whole of the Government benches put together.

Mr. William Yates: That is just impudence.

Mr. Gurden: The right hon. Member for Huyton (Mr. H. Wilson) should be fair. There are several hon. Members on this side of the Committee who have not spoken in the debate, or delayed proceedings in any way on this Finance Bill. Others have spoken only for a few minutes in the whole of our debates on the Bill, and some of us wish to say a few words on this new Clause. We do not wish to keep the Committee for very long. The right hon. Member's suggestion is very unfair.

Mr. Wilson: If hon. Members opposite want to speak they had better sort things out with the Patronage Secretary.

Mr. Nabarro: On a point of order. It has nothing to do with the Patronage Secretary. Is it in order for the right hon. Gentleman to make impudent remarks about the Patronage Secretary?

The Temporary Chairman: I am getting a little anxious about many impudent remarks going about this evening. The main purpose is to get on with the debate, and I hope that hon. Members on both sides will try to do that.

Mr. Wilson: I was merely saying that it is quite in order for the hon. Member and any other hon. Members opposite who want to speak on this matter to do so, but in that case, if they object to my reference to the Patronage Secretary, they should sort out the matter with the Chancellor and consider whether they do intend to get the Bill through the Committee stage by seven o'clock tomorrow evening. The Opposition have shown remarkable co-operation, in great


contrast to hon. Members opposite in 1950 and 1951 at this time in the morning. We have shown remarkable co-operation in allowing a great number of Clauses to go through without any debate. I do not think that hon. Members opposite will deny that a considerable number of quite important Clauses went through on the nod. We have also allowed one new Clause to be debated with very little comment from this side. I cannot imagine that many hon. Members opposite would agree with the proposition that we should be sitting up at two, three, four, five or six o'clock in the morning dealing with some of the important new Clauses still on the Notice Paper.
If we acquiesce in the proposition that the Chancellor should get his Bill by seven o'clock tomorrow evening it means a considerable degree of co-operation on our part—more than is reasonably called for. If hon. Members apposite want to scrap the whole arrangement to get the Bill by that time it is up to them. I do not want to be unfair. They have a right to speak. They can say that the Chancellor will not have his Bill by seven o'clock, because if this goes on and hon. Members opposite insist on their rights—as they are entitled to do—we shall insist on ours, and once we start to do that any suggestion of the Bill's getting through by seven o'clock tomorrow evening can be disregarded.
1.15 a.m.
I should like to see the Chancellor get his Bill by seven o'clock tomorrow night, but I make it absolutely plain that it will not be on the basis of my hon. Friends sitting silent while repetitive speeches are made from the benches opposite or on the basis of our withdrawing at seven o'clock tomorrow night some Clauses to which we attach considerable importance. Hon. Members opposite may have it which way they want, but I am not going to ask my hon. Friends to restrain themselves any more—and that goes for tomorrow afternoon as well—if this kind of thing goes on.

Mr. Diamond: May I ask my right hon. Friend to reconsider the matter? Is it in the best interests of the House of Commons that we should try to get all this done by seven o'clock tomorrow night? Is that not putting an impossible

strain on anyone's willingness or ability to do his job, even if we sit continuously, which is not under consideration? There are five important new Clauses to be discussed tonight. I ask my right hon. Friend to bear this in mind. If every hon. Member on these back benches keeps his mouth tightly shut on all of them—it is not a matter of personal restraint but of doing one's duty to one's constituents—even if we did that and there were only speeches from our Front Bench, objection is taken to those speeches in reply to speeches of hon. Members opposite.
My right hon. Friend has done a great duty and is carrying a great weight, but objection is made time after time when he puts forward the official Opposition point of view from the Front Bench. It is absolutely unheard of that the Opposition should not be able to give the official Opposition view on Amendments and new Clauses. Although we want to co-operate as fully as possible, is not my right hon. Friend asking something which is impossible in the interests of the Committee?

Mr. H. Wilson: I want to make it clear that I stand by the undertaking I gave to the Chancellor and the Patronage Secretary that I will do everything in my power to get the Bill through by seven o'clock tomorrow night. I stand by that, but my task is being made impossible by the attitude of hon. Members opposite, and not least by some of the epithets which are thrown out by hon. Members opposite. I hope that they understand that.
What my hon. Friend the Member for Gloucester (Mr. Diamond) asked is perfectly fair. I am asking him to a certain extent to ignore feelings he must have about some of these new Clauses. It must be very galling for a trained accountant to hear some of the speeches, made from both sides of the Committee, and not to get up and say what is the position as he sees it. As far as I am concerned, I want to see the Bill go through by seven o'clock, but if the debate on the new Clause dealing with Schedule A—which will continue when I withdraw this Motion—is to go on in the same way as it has, I shall find it impossible to ask my hon. Friends to co-operate in the way I wish them to. I hope that hon. Members opposite will


keep to the absolute minimum any observations they wish to make. I hope also that if any of my hon. or right hon. Friends do take part in the debate they will be given the courtesy normally given to Opposition speakers on the Finance Bill. On that understanding I should be prepared to withdraw the Motion, but if we are to have a recurrence of the kind of behaviour we had when my hon. Friend the Member for Sowerby was speaking, as far as I am concerned all bets are off and hon. Members opposite had better see what can be done with the Finance Bill.

Mr. Iremonger: In view of the rather generous things which the right hon. Gentleman has just said, I should be glad if he would allow me to say that I may possibly have seemed somewhat offensive in what I said. I am sure that the Committee will appreciate that what the hon. Member for Birmingham, Sally Oak (Mr. Gurden) said may not have appeared to him as it did to hon. Members on this side, but I will not detain the Committee. It seemed that it was something of a threat which the right hon. Gentleman the Member for Huyon (Mr. H. Wilson) was putting to us, namely, that if we did not shut up he would not help the Government to get through their business. On reflection, what I said was, perhaps, a little unfair and unjustified but perhaps the right hon. Gentleman will appreciate the provocation I was under.

Mr. H. Wilson: I will accept that in the spirit in which it was made. My complaint, and the reason why I rose to move my Motion, was not because of the number of hon. Members who wished to speak, but because of the reactions towards my hon. Friend the Member for Sowerby (Mr. Houghton) who sought quite properly to intervene in what some hon. Members opposite seemed to consider was something of a Conservative debate. It is not a Conservative debate. It is a debate for the Committee, and my hon. Friends have shown restraint.
I was more concerned with the attitude shown to my hon. Friends rather than with the number of hon. Members who wish to speak, but, if the Chancellor wants this Bill to be completed by seven o'clock tomorrow evening, we shall have to make much more rapid progress than

we have made. It may come into the mind of the Patronage Secretary as to how he can bring this debate to an end. After all, he has his methods of peaceful persuasion. I have seen him use them with considerable success. Of course, there are other methods and I undertake that in any such proposal we should not lead our cohorts into a Division against him.
On the other hand, if he wants to allow full debate, then that is a matter for him and I am quite sure that the points which I have tried to make have fully entered the consciousness of all those, including the Chancellor downwards—or sideways in the case of the hon. Member for Kidderminster (Mr. Nabarro)—and I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

Mr. F. A. Burden: It would be most ungenerous not to respond to the words just spoken by the right hon. Member for Huyton (Mr. W. Wilson). I should like to say, however, that even if the hon. Member for Sowerby (Mr. Houghton) has got a little testy this evening, we all think that he has had some justification because he has had a considerable load of work to carry, and he has carried it nobly.
I intervene at this very early hour because of my extreme disappointment with the remarks made by the Chancellor when he made it perfectly clear that he has no intention whatsoever of doing anything at all this year to ease the burden, which is a very considerable one, of the Schedule A tax on owner-occupiers.
I have shown a lot of restraint over the last few years on this matter and I have not pursued it so strongly as I am prepared to do tonight because last year, in view of the circumstances of the country, one could accept what the Chancellor then said, namely, that it was not the time to do anything but that he was very seriously—I repeat, very seriously—considering the possibility of some relief this year. This year we have heard exactly the same story. I assure the Committee that in my constituency a great number of owner-occupiers find this annual tax a very serious strain on their resources.
We have all listened to the arguments over and over again. It is always possible for a Government on fiscal grounds to refuse any measure which is wholly justifiable and desirable on social grounds. If the Tory Party stands for anything, it stands for a property-owning democracy. It has introduced many measures and carried out a housing programme which has inspired many people to wish to own their houses, more than ever before in our history. I believe that the next logical step towards ensuring that people, particularly young people, have their own roofs over their heads is to abolish this tax.
I hope that when considering this the Chancellor will also look at the possibility of reducing the conveyancing costs. This is a very apposite point.

The Temporary Chairman: Order. I cannot accept that that is within the terms of the Clause.

Mr. Burden: I am sorry if I am out of order, Mr. Williams. If my right hon. and learned Friend is unable to give any relief on Schedule A this year, I hope that he will consider if there is another means by which he can give some relief. I hope that he will promise even at this late hour that he will at least go part of the way and make some concession, say up to £15.

Mr. E. Fernyhough: The hon. Member for Gillingham (Mr. Burden) asked the Chancellor of the Exchequer to make a concession up to £15 if he could not go the whole way. We on this side tried to persuade the Chancellor to do that last year. If we had had the support of the hon. Member and his colleagues, that would now have been the law of the land. Why did they lack the courage to do last year what they want the Chancellor to do this year? We could have gone half way last year. Hon. Members opposite are prisoners of their own propaganda. Of course, they have gone to the electorate and said, "We believe in the abolition of Schedule A." They went to the electorate at the same time and said, "We believe that the private patient should not have to pay for medicines."
When they returned to the House of Commons, they found that the Chancellor—whether it was this one or his

predecessor—was unable to meet them. They must realise that they cannot be irresponsible if they take part in British democracy. They cannot at the hustings make the kind of promises they have been making and then pretend to get all hot and bothered when the Chancellor does not meet their wishes but in the last analysis always fail to go into the Lobbies to demand from the Chancellor what they promised their constituents.
That is precisely the position tonight. [Interruption.] It is no good the hon. Member for Kidderminster (Mr. Nabarro) making his usual rude interruptions. If he does so, he will find that I can talk as long as he can. I do not wish to do that. I wish to be co-operative. I want the Chancellor to get his Bill by seven o'clock tomorrow night, but I assure the hon. Member and his colleagues that, if they make unnecessary interruptions, I was brought up in a hard school. I have suffered these attacks a long time. I hope that I know how to deal with them, but I do not want hon. Members to provoke me, because I want to get on with the Bill. We have promised our co-operation to the Chancellor and I know that the Financial Secretary wants us to get on with the Bill. So it is not for reasonable people like myself to be provoked by hon. Members like the hon. Member for Kidderminster.
1.30 a.m.
Most hon. Members opposite are victims of their own propaganda in this matter. The promises that they made irresponsibly at the General Election are now haunting them, because their constituents are following them. They are asking them what they will do about it. The hon. Member for Crosby (Mr. Graham Page), for example, wondered what the Chancellor would have done had the Schedule A tax not been in operation. The Chancellor would have done what a previous Cabinet Minister said should be done. He would treat them mean and keep them keen, which is what is being done in respect of this tax. He is treating hon. Members opposite mean. He is letting them down. He is not helping them to fulfil the magnanimous promises they made to the electorate. But he is keeping them keen.
Last year, hon. Members opposite had the chance of giving some measure of


relief to the hard-pressed Schedule A taxpayers, but they lost their way. There are two Division Lobbies, and hon. Members opposite went into the wrong one. If the Conservative Party tonight is anxious and keen about this, if all those who have assured their constituents that they believe in this principle are prepared to back their principles in the Division Lobby, they can get this relief. It does not matter what the Whips say. The power is in their own hands. If they are determined to keep their promise to their constituents and that the hard-pressed Schedule A taxpayer shall be relieved of this burden, all that they have to do is to go into the right Lobby.
It is no good hon. Members opposite making speeches in their constituencies saying how much they are against this tax, what an imposition it is and how the owner-occupier is being exploited unless, in the last resort, they are prepared to use the only power that a backbench Member has, and that is to go into the Lobby in accordance with the convictions they hold. I see the hon. Member for Kidderminster nodding his head. I am sure that he will do just that. He will not lack the courage. Whatever else may be said of him, it cannot be said that he has ever failed when courage has been required to offend either the Patronage Secretary or his Front Bench in general. But he has never led a big battalion—

Mr. Nabarro: I have led the whole of the Labour Party. [An HON. MEMBER: "Never."]

Mr. Mitchison: On a point of order. May we have a cessation of these sedentary interruptions from the hon. Member for Kidderminster (Mr. Nabarro)?

The Deputy-Chairman (Major Sir William Anstruther-Gray): Certainly, they are undesirable, but I am bound to say that in the last few minutes I thought that the debate had gone with singularly little interruption.

Mr. Nabarro: I remind the hon. Member of the occasion when the whole of the Labour Party "got fell in" behind me on the increased tobacco duty last year—a very appropriate lead, I thought.

Mr. Fernyhough: While I am grateful to my hon. and learned Friend the Member for Kettering (Mr. Mitchison) for protecting me from the somewhat malicious attacks of the hon. Member for Kidderminster, I can assure him that they are not too heavy. If they become severe, I may respond in my normal pacific manner.
We have heard a lot of talk tonight, particularly from the hon. Member for Crosby and from the hon. Member for Ilford, North (Mr. Iremonger). We have heard a lot about what the Government are doing for a property-owning democracy. We were told that if only this tax were abolished it would encourage so much more a property-owning democracy. A lot of people believed Sir Anthony Eden when he first went to the country with his battle-cry "We believe in a property-owning democracy," but there are lot of people this week who have had some bad news as a result of the Chancellor's activities. The building society interest rates are to be increased, and they will cost far more than Schedule A. If the Government would reduce for the Schedule A taxpayers the burden which the Chancellor has imposed on them by means of his financial policy, they would be doing a far better service than by trying to escape from the chains which hon. Members opposite have placed around themselves as a result of the promises which they made at the hustings.
There is one aspect which has already been mentioned and about which I feel deeply. I am not opposed to the granting of relief to Schedule A taxpayers along the lines and to the degree sought by this Clause, but I say to hon. Members opposite that there are far more tenants than there are owner-occupiers. I am the only member of my family who owns his house. I have a big mortgage, but it will be paid off eventually. But I know what happens when tenants do their own improvements. Members of my family have put in new grates; they have had the floors relaid, window sills and electric wiring renewed. They have done all those things, but not a penny piece can they claim in tax relief. They have spent the money which the landlord should have spent, because the rent which they pay is supposed to include the charges for repairs. The landlord


has not done his duty. He has evaded his responsibility. The tenants themselves have kept the property in good repair, and in many case they have improved it. But not a single word do we hear from the benches opposite on behalf of these people, and there are more of these people than there are those on whose behalf this plea is being made tonight.
I say to the Financial Secretary: this may be a desirable relief, but it can be acceptable to fair-minded people only when the same measure of relief which is given to those who own their own houses is given to those who spend money on houses which are owned by somebody else. As the late Member for Ebbw Vale once said, we are not against people owning their own houses. We are against people owning other people's houses. We are not opposed to the owner-occupier, but we are opposed to the landlord who does not treat his tenant properly, who does not spend money on the property and does nothing to obtain relief for the tenant who spends money on property which does not belong to him.
The Financial Secretary is present, and I should like to say this to him. We are told that this relief would cost the Treasury about £43 million. In a year when we have doubled the charge for medical prescriptions, when we have increased the charges for teeth and spectacles and have put up the prices of welfare foods, it would be indefensible and intolerable that hon. Members opposite who supported mean attacks of that kind should go into the Lobby and ask the Chancellor to disburse £43 million in this manner.
I feel very sorry for the Financial Secretary and, indeed, for the Chancellor of the Exchequer, because the trouble with the hon. Members opposite is that they want every single item in the balance sheet to be more. They want more for roads, more for schools and more for everything, but, at the end, they want the total to be less. They want each individual item of expenditure to go up and at the same time they want total Government expenditure to go down. That cannot be done.
When the hon. Member for Crosby says that it is not his job to ask the Chancellor from where he would get the

£43 million if he were to give that amount away in relief of this kind, he is not facing up to his responsibility as a Member of the House of Commons.

Mr. Graham Page: I should be out of order were I to suggest any alternative source of taxation from which this amount could be raised.

Mr. Fernyhough: I am quite sure that even, if the hon. Gentleman would have been in order in doing so, he would not have suggested an alternative way in which this revenue could be raised. The complete indifference of too many hon. Members opposite to what I would term financial probity is a measure of their irresponsibility. If we demand Government expenditure and at the same time demand tax reliefs, we surely have the obligation to point out to the Chancellor the source from which he could raise the amount of revenue which he would lose by granting those reliefs.
This new Clause would have made a greater appeal to me had it provided for the rights of tenants to be considered, because I do not believe that they are inseparable from the rights of owner-occupiers. I think that it would be very unfair if the present Chancellor or any Chancellor of whatever party gave a concession of this kind without, at the same time, giving a similar concession to tenants who carry out repairs to the property of their landlords. I would no more endorse that than I would go into Division Lobby tonight to support this Clause.

Mr. Gurden: I want to make it perfectly clear that, at some considerable sacrifice, many of us on these benches have had to forgo speaking in the debate on this new Clause. We wanted to make our contribution to the debate and to go into the facts—

Mr. Loughlin: On a point of order. May I ask you, Sir William, who has been responsible for the hon. Member having to forgo his right to speak in this debate?

The Deputy-Chairman: I do not think that that is a point of order. The hon. Member is making his speech and presenting his arguments to the Committee.

Mr. A. C. Manuel: Further to that point of order. The hon. Member made a definite statement to


the Committee to the effect that hon. Members opposite have had to forgo making a contribution to this debate. Is there some motive behind this about which we do not know. Obviously, my right hon. Friend the Member for Huyton (Mr. H. Wilson) is not controlling what is happening on the other side of the Committee. It must be the Patronage Secretary.
1.45 a.m.

The Deputy-Chairman: Order. A point of order does not arise. There is no point of order for the Chair to deal with.

Mr. Loughlin: On a point of order. If, Sir William, the Chief Patronage Secretary is instructing Members on his side not to speak, what redress from the Chair have those Members?

The Deputy-Chairman: Order. So long as the debate is carried in an orderly fashion I am perfectly content to allow it to continue, and it is orderly.

Mr. Loughlin: On a point of order. Is there not a breach of Privilege in this matter?

The Deputy-Chairman: No. The answer, in my judgment, is that there is no breach of Privilege involved.

Mr. Gurden: I was merely trying to point out, if hon. Members opposite had had a little more patience, that I was sympathising with what the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) had to say on the Motion to report Progress. I very much agreed with everything which was said then, and I was saying that the need to curtail the debate is essential and that, therefore, I am prepared to forgo the speech which I was going to make—

Mr. Manuel: Sit down then.

Mr. Gurden: —more or less, with the exception, if I make it, of appealing once more to the Chancellor for a little more information on what he means by reconsidering, as he promised to do, this whole question in a year or so. I believe we have not had sufficient information from the Chancellor—

Mr. Manuel: The hon. Member is running away from the position.

Mr. Gurden: —to enable us to decide whether or not to go into the Division Lobby in favour of this new Clause.
I and my hon. Friends from Birmingham have a new Clause very similar to this one moved by my hon. Friend the Member for Kidderminster (Mr. Nabarro), and for that reason I think that we ought to make some comment on this new Clause. I just want to say to my right hon. and learned Friend the Chancellor that I do not doubt the sincerity of what he said, but we have heard very much the same sort of thing year after year in Finance Bill debates, and however much he may have meant what he said, it does not ring so true as we should like to think.
May I, too, take exception to the answers to the questions which we have seen month after month for the past four or five or six years? The answer given every time is that it is not possible to anticipate the Budget statement in a matter of this description. If the intention of the Government were clearly stated on Schedule A matters at any time during the year, it would not interfere in any way with the Budget statement; it would not really damage the financial position of the country; no one could take advantage of a statement that Schedule A was to be abandoned in 1963 or whichever year might be chosen. I really think that that sort of reply on such a question as this, what is to happen to Schedule A, is really not a sincere one, when all the time it is quite clearly known that there is no intention of making any alterations in Schedule A.
I should like very much to put the position of my constituency in Birmingham. We have tremendous support in the Conservative Party for the abolition of Schedule A, but if we are ever to get it, it appears that we shall have to join the Liberal Party. Certainly, neither of the other two parties is unanimous on this matter, in spite of the tremendous majority of Conservative supporters throughout the country who have made it perfectly clear to the Government and to our party that something must be done. Would my right hon. and learned Friend make clear again from the Dispatch Box what he means by speaking of dealing with the matter at a later date? I appeal to him to go a little further with his explanation.

Mr. Loughlin: I find myself in something of a dilemma in looking at this problem. I cannot think that the hon. Member for Birmingham, Selly Oak (Mr. Gurden) was quite serious when he said that there was tremendous support inside the Tory Party for the proposal moved by the hon. Member for Kidderminster (Mr. Nabarro), because it is so very simple to prove whether that support exists within the Parliamentary Conservative Party, as my hon. Friend the Member for Jarrow (Mr. Fernyhough) has pointed out. If there is tremendous support among hon. and right hon. Members opposite for this proposal, they can have it adopted tonight. I assure them that if they go into the Division Lobby and the Opposition go into the opposite Lobby they will have a majority. It is as simple as that. If they want to claim that they as the Conservative Parliamentary Party really believe that Schedule A should be abolished, there is no difficulty at all in ensuring that that will come about. They can take my word for it that there are sufficient numbers on the benches opposite now to ensure a complete majority and the capitulation of the Chancellor of the Exchequer.
My difficulty is that I see a great measure of justice in the case advanced for the abolition of the tax. I do not want to follow hon. Members opposite in their arguments for the Tory Party concept of a property-owning democracy. I am one of those people who with a limited income had the problem of buying a house when I got married, and because of the policy pursued by the Government since 1951 I have had to see a great deal of my money going in interest rates. There is an enormous number of young married men at present who, because of the housing situation created by a Tory Government, can see no possibility for many years of securing a house other than by buying one. They are faced not only with increased interest charges but also with the increased prices of houses because of the Government's failure to restrict land prices to some degree. And there is not only this problem of land prices when buying freehold but also the high leasehold charges in many cities because of the increased price of land. If the Tory Party is telling me that the way to create a property-owning democracy is to boost

the cost of houses to men and women with relatively low wage rates, all I can say is that it is the greatest nonsense I know.
I do not believe that we should pursue a policy which is likely to impose additional burdens on men and women who in the face of great difficulties are buying their own homes. I am not interested in the motives of hon. Gentlemen opposite. I am not interested in the fact that the motive of the hon. Member for Kidderminster may be to secure further relief for Surtax payers. What I am concerned about is that I know that there are enormous numbers of young men and women who are trying to buy their own homes and are having this additional burden placed upon them.
I should like to see acceptance by the Government of a new Clause along the lines of that moved from the Opposition Front Bench last year. But that Clause is not at this stage before the Committee. I have the alternative of saying that I am not going to support the new Clause now before the Committee solely because it is proposed by persons with motives different from my own or of sitting down and doing nothing about it at all. That is my dilemma. I certainly have no desire to go into the Division Lobby with some hon. Members opposite.

Sir Peter Agnew: One cannot choose one's friends to go into the Lobby with. One chooses one's friends in the people one finds there.

Mr. Loughlin: If the Committee proceeded along those lines there would be some peculiar Divisions. I do not know how often the hon. Gentleman applies that principle to himself, how often he applies the principle of sitting on the Conservative benches and opposing the Government and then failing to go into the Division Lobby. Whether or not it applies to the hon. Gentleman, it applies to some hon. Gentlemen opposite who sometimes have courage and sometimes have not.
I do not want to go into the Division Lobby with some hon. Gentlemen opposite, but I find myself in very much the same position as my hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates)—

Mr. Fernyhough: If my hon. Friend is going to take part in a Division at all, he cannot help himself, because there will be some in one Lobby and some in another.

Mr. Loughlin: In his attempt to assist me, my hon. Friend has only created greater confusion. It might be better if he did not give such assistance.
What we have to face in looking at the problem is that the tax that we are discussing imposes an additional burden on many young people who are trying to buy their own houses. I wish that the Chancellor would give some indication that he would look at the possibility of limitation of relief along the lines suggested tonight and last year. If he does not do that, I hope to see the greatest possible revolt from the back benches opposite.
2.0 a.m.

Mr. Nabarro: I listened with great care to the comments made by the Chancellor of the Exchequer on this new Clause and feel bound to say they were almost entirely unsatisfactory. We have been very patient in this matter. We raised it first in 1959. On that occasion—I respond at once to the hon. Member for Huddersfield, West (Mr. Wade), the Liberal who taunted me that I did not vote with him then—the Schedule A Amendment—I explain this, I think, for the twentieth time—followed an Amendment which had been voted on to reduce the duty on beer and I believe that I absented myself, paired, from the hon. Member's Amendment.

Mr. Arthur Holt: The hon. Member is completely mistaken. In fact he voted against exactly the new Clause he is proposing this evening. If he is in any doubt or confusion, I invite him to consult Volume 607 of HANSARD for 15th June, column 68, where his name appears in the voting list supporting the Government and against the Clause moved by my hon. Friend the Member for Huddersfield, West (Mr. Wade).

Mr. Nabarro: I apologise. I voted with the Government on another Amendment in the same Finance Bill. I was absent, paired, on the Schedule A controversy. I obviously cannot recall every Division on every Finance Bill, but that is beside the point. What I

am saying is that in 1960 we carried on this struggle. Fortunately, on that occasion I led from the Conservative side and a number of Liberals—by no means all, only half—thought fit to be present to support it.
This year we have continued the struggle. Every year we are told by the Chancellor that the matter will be further considered, that there is a good case for abolition and a good case against abolition. We know all these things from the Report of the Royal Commission. We have already weighed all the available evidence in this controversial matter. This evening the Chancellor has been able to say only that he must defer a further decision until 1963 when rating valuation will take effect. That reply is in itself inconsistent with all earlier answers given to me on this topic, because the Treasury Ministers have always averred that Schedule A was in no way related to rating valuation matters and that they could not be considered in conjunction with one another.
I very deeply regret to say to the Chancellor that I cannot accept as reasonable the assurance he has given about reconsideration two years hence. I must ask my hon. Friends who are associated with me in this new Clause to support me in the Division Lobby. I also hope that the loquacious Member for Bolton, West, who is so anxious to recall our activities in 1959, will bring all six Members of the Liberal Party into the Lobby to support me. I see only three of them in their places. No doubt the other three are absent, not paired. I hope that I shall have the support of all three political parties.

Mr. J. Grimond: I very much doubt that the hon. Member for Kidderminster (Mr. Nabarro) will muster 50 per cent. of the Conservative Party in his Division Lobby. His record on this matter is so peculiar that it is very odd that he should bring it in evidence. He is on record as voting against this proposal. There is a perfectly good argument against the proposal before the Committee, but what there is no argument for is pretending that one is in favour of abolishing this tax but not voting for the new Clause.
There is a perfectly good argument for maintaining this tax and an argument for


abolishing it. What we suffer from, year after year, in this Committee, is the Conservatives saying that they are against the tax but that, of course, they are bound to vote for the Government, who intend to maintain it.
This also goes on at General Elections, but now there is a new doctrine in the Conservative Party—that they intend to keep their election pledges. That is why we are faced with this ridiculous proposal to give a large subvention to the Cunard Company. There is no other reason for that than that the Conservatives promised it at the last General Election, and for this extraordinary reason they intend to go through with it.
We who have fought the Conservatives know that year after year, and at election after election, they denounce this tax but when the opportunity arises to get rid of it by voting against it they do not do so. Tonight they have an opportunity again of coming into the Lobby with us. Perhaps we can hope for

50 per cent. of them. We should be content with that. The hon. Member for Kidderminster (Mr. Nabarro) has recanted his views expressed in 1959, when he voted against this proposal. We hope that he will now, having plucked up his courage, come with us into the Lobby against the Government.

I agree with the hon. Member who said that hon. Members should join the Liberal Party. It is the only party which has at least been honest in this matter. We have always opposed this tax and have voted against it. We have not merely made easy speeches in our constituencies. The opportunity now arises to show whether the Conservatives really believe that it should be abolished or whether they merely look upon abolition as a popular thing to advocate at elections.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 15, Noes 110.

Division No. 214.]
AYES
[2.7 a.m.


Bullus, Wing Commander Eric
Hollingworth, John
Talbot, John E.


Burden, F. A.
Holt, Arthur
Wise, A. R.


Cleaver, Leonard
Iremonger, T. L.
Yates, Victor (Ladywood)


Grimond, J.
Matthews, Gordon (Meriden)



Gurden, Harold
Montgomery, Fergus
TELLERS FOR THE AYES:


Hocking, Philip N.
Page, Graham (Crosby)
Mr. Nabarro and Mr. Wade.




NOES


Agnew, Sir Peter
Gibson-Watt, David
Oakshott, Sir Hendrie


Allan, Robert (Paddington, S.)
Glover, Sir Douglas
Osborn, John (Hallam)


Barber, Anthony
Green, Alan
Panned, Norman (Kirkdale)


Bennett, F. M. (Torquay)
Grasvenor, Lt.-Col. R. G.
Pearson, Frank (Clitheroe)


Berkeley, Humphry
Hamilton, Michael (Wellingborough)
Percival, Ian


Bishop, F. P.
Harrison, Col. Sir Harwood (Eye)
Pickthorn, Sir Kenneth


Bourne-Arton, A.
Hastings, Stephen
Pott, Percivall


Box, Donald
Hendry, Forbes
Powell, Rt. Hon. J. Enoch


Boyle, Sir Edward
Hiley, Joseph
Price, David (Eastleigh)


Browne, Percy (Torrington)
Hill, J. E. B. (S. Norfolk)
Prior, J. M. L.


Bryan, Paul
Holland, Philip
Proudfoot, Wilfred


Buck, Antony
Hopkins, Alan
Pym, Francis


Campbell, Gordon (Moray &amp; Nairn)
Hornby, R. P.
Redmayne, Rt. Hon. Martin


Carr, Compton (Barons Court)
Hornsby-Smith, Rt. Hon. Patricia
Rees, Hugh


Carr, Robert (Mitcham)
Hughes Hallett, Vice-Admiral John
Roberts, Sir Peter (Heeley)


Chichester-Clark, R.
Hughes-Young, Michael
Shaw, M.


Clark, Henry (Antrim, N.)
Irvine, Bryant Godman (Rye)
Shepherd, William


Cordeaux, Lt.-Col. J. K.
Jackson, John
Smith, Dudley (Br'ntf'rd &amp; Chiswick)


Cordle, John
Johnson, Eric (Blackley)
Smithers, Peter


Corfield, F. V.
Kirk, Peter
Stevens, Geoffrey


Critchley, Julian
Legge-Bourke, Sir Harry
Steward, Harold (Stockport, S.)


Currie, G. B. H.
Lewis, Kenneth (Rutland)
Stodart, J. A.


Dalkeith, Earl of
Litchfield, Capt. John
Studholme, Sir Henry


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Rt. Hon. Selwyn (Wirral)
Summers, Sir Spencer (Aylesbury)


Deedes, W. F.
Longden, Gilbert
Taylor, Edwin (Bolton, E.)


Donaldson, Cmdr. C. E. M.
Loveys, Walter H.
Thomas, Peter (Conway)


du Cann, Edward
Lucas-Tooth, Sir Hugh
Thompson, Richard (Croydon, S.)


Duncan, Sir James
MacArthur, Ian
Thornton-Kemsley, Sir Colin


Elliot, Capt. Walter (Carshalton)
Maddan, Martin
Tiley, Arthur (Bradford, W.)


Elliott, R.W. (Nwcastle-upon-Tyne, N.
Marshall, Douglas
Turner, Colin


Errington, Sir Eric
Mawby, Ray
van Straubenzee, W. R.


Farr, John
Maxwell-Hyslop, R. J.
Wakefield, Edward (Derbyshire, W.)


Finlay, Graeme
Mills, Stratton
Walder, David


Fraser, Ian (Plymouth, Sutton)
More, Jasper, (Ludlow)
Walker, Peter




Wall, Patrick
Whitelaw, William
Woodnutt, Mark


Ward, Dame Irene
Wilson, Geoffrey (Truro)
Worsley, Marcus


Webster, David
Wolrige-Gordon, Patrick
TELLERS FOR THE NOES:




Mr. Noble and Mr. Peel.

The Deputy-Chairman: The next new Clause selected is that in the name of the hon. Member for Bodmin (Mr. Marshall)—Income Tax: non-ferrous metal mines in the United Kingdom).

Mr. Douglas Marshall: I do not propose to move that new Clause, Sir William.

2.15 a.m.

Mr. H. Wilson: I think it should be on the record that if the hon. Member for Bodmin (Mr. Marshall) is not moving this new Clause, which I think has a certain amount of support in all parts of the Committee, it is on the understanding that the corresponding new Clause which was to be debated with it, will be selected tomorrow. It would be useful, Sir William, if you could confirm that the new Clause—(Non-ferrous metal mines in United Kingdom: relief from profits tax) which is associated with this Clause, will be called tomorrow when the hon. Member may make what I hope will be the same speech as he would have made on this one, and other hon. Members will be able to take part in the debate which otherwise we should be having now.

The Deputy-Chairman: Yes, that new Clause is down for selection and it will be possible then to discuss this new Clause and the new Clause—(Profits tax: non-ferrous metal mines in United Kingdom)—and also new Clause—(Non-ferrous metal mines in United Kingdom: relief from income tax).

New Clause—Capital allowances

(1) the initial allowance under Chapter II (Machinery and plant) of Plant X of the Income Tax Act, 1952, in respect of expenditure to which this section applies shall be equal to one-half of the expenditure, and accordingly in relation to such an allowance—

(a) subsection (2) of section fifteen of the Finance Act, 1958 (which in relation to certain expenditure increased the rates of initial allowances under the said Chapter II from one-fifth to three-tenths), shall not apply;
(b) subsection (1) of section two hundred and seventy-nine of the Income Tax Act, 1952, shall have effect with the substitution of the word "one-half" for the word "two-fifths";
(c) sub-paragraph (2) of paragraph 3 of the Fourteenth Schedule to the Income Tax

Act, 1952, shall have effect with the substitution in paragraph (d) and sub-paragraph (i) of the word "one-half" for the word "three-fifths". And in paragraph (b) of subsection (1) of section two hundred and eighty-two and paragraph (b) of subsection (1) of section two hundred and eighty-one of the Income Tax Act, 1952, for references to five-fourths there shall be substituted references to six-fourths.—[Mr. Wade.]

Brought up, and read the First time.

Mr. Wade: I beg to move, That the Clause be read a Second time.

The Deputy-Chairman: It may be convenient to discuss with this the new Clause—(Investment allowance for dry docks).

Mr. Wade: This Clause deals with the subject of capital allowances. This is a very important subject and I am sorry that it has to be debated at this late hour. Although I move it with brevity, it is not because I am unaware of the very great issues involved. The purpose of this new Clause is to increase the rate of depreciation allowed on industrial plant and machinery. The object is to stimulate a higher rate of productive investment, and I hope hon. Members will agree with that aim. Whether they agree with the precise means is another matter, but I hope that they will agree that it is an essential aim for this country.
As to the wording of the Clause, I admit that it is somewhat complex. That is in keeping with new Clauses to Finance Bills. If the wording is entirely correct that, I think, will be a minor miracle, but I hope that the spokesman of the Treasury Bench will consider this matter on its merits and not find fault with the wording of this Clause. I have mentioned the aim. The method of achieving it is, first, by raising the amount of initial allowance from 10 per cent. to 50 per cent. and, secondly, to increase the rate of accelerated depreciation. It is hoped that this would give firms a considerably greater incentive to buy new plant and machinery out of taxable profits.
The general idea is that capital allowances should be very substantial in the earlier years of the life of productive capital. Every incentive should be given


to encourage the modernisation of plant and machinery. If this country is to compete in the export markets, and compete in economic growth, then firms must always be looking out for new plant and machinery. That is vital, whether Britain goes into the Common Market or stays out of it. There must always be this keenness to acquire the most up-to-date plant and machinery. As an aside, perhaps I may draw attention to the fact that, where new machinery is not available in this country and has therefore to be imported from overseas, it is anomalous that no claim can be made for exemption from import duty for that machinery if its value is less than £2,000. I will not pursue that point now, but by various means it is important that there should be a better rate of growth. I believe that the correct expression is "rate of growth of output related to average investment ratio".
I have a vast amount of material here, and could keep the Committee for half-an-hour in quoting statistics; but I will not do so. What I will quote is the Table for Average Investment Ratio and Growth of Output for the years 1950–58. Japan is at the top of the list, the Federal German Republic is second, and the United Kingdom is at the bottom. There are other statistics which compare Britain with most of the other western European countries, and it is disappointing when one sees those comparisons. There are various methods of dealing with depreciation in different countries, and some of the comparisons between this country and other European countries.
There are differences in treating the amount which can be claimable compared with the amount reserved in the actual accounts, and there seems to be something to be said for a closer relationship between what is allowed for tax purposes and what is actually allowed for in the accounts. Then, in some European countries, there is an allowance for inflation. Account is taken of replacement costs which, so far as I know, have never been taken into account in this country. In some European countries, there is allowance for the falling value of money. Replacement costs may be considerably in excess of the original sum expended and which has been written off. It is only

right that comparisons should be made between Britain and her European competitors, particularly having regard to the unfavourable figures as to rate of growth when compared with some of our competitors.
Perhaps the most significant feature of all is the effect on this country of periodical economic crises which have led to changes every few years in the depreciation allowances, capital allowances, and so on, with the result that businessmen have found it very difficult to plan ahead or to rely with any certainty on the continuation of the allowances which have been made. I am informed that in Western Germany and Sweden the business community feels that it has the full support of the Government in this matter. It has not the same fear of constant changes due to economic crises.
The Clause is not merely a probing one. I hope that it will lead to action. It is, nevertheless, intended to enable the Government to make clear what they have in mind for the future. What is their long-term programme? I hope that it will prove to be on the lines indicated in the Clause. I said at the outset that I proposed to move the Motion with great brevity because of the late hour. I hope that we shall have a forthcoming answer at the conclusion of the debate.

Mr. Holt: I should like to add a few words to those of my hon. Friend the Member for Huddersfield, West (Mr. Wade). Every member of the Committee must feel extremely concerned about the present economic position. We are failing to export as much as we require, the pound is under great pressure, prices are rising, there is a whole stream of wage increases in the pipeline, and interest rates are rising. One way out is by a policy of restriction. It has been tried before and has failed. Another way out is by a carefully planned method of growth. So far this country has been remarkably unsuccessful in doing this.
It may be achieved in several ways. We do not pretend that increasing the depreciation allowances so that machinery can be quickly written off is the only method of getting growth. My hon. Friend the Member for Orkney and


Shetland (Mr. Grimond), in a very excellent pamphlet called "Growth not Grandeur" which he wrote earlier this year, listed some of the other steps which had to be taken, such as a reduction in tariffs, making industry a great deal more competitive, etc.
One of the most important factors in obtaining growth is undoubtedly to increase the rate of investment. The most direct way in which the Government can do this is by increasing allowances in the way suggested in the Clause. I hope that we shall hear from the Government either that they are prepared to accept our method of doing this or, if not, that they have plans of a similar nature to be put into operation in this Bill. They have the opportunity to lay their plans before Parliament before we part with the Bill. The situation is extremely urgent. They should not miss the opportunity.

Mr. Jay: I welcome the fact that the Liberal Party is in favour of planned growth and is, I gather, against grandeur. We are now being asked, as we have been asked many times in recent years, to introduce a more favourable stimulating system of capital allowances in order to promote investment, secure higher productivity, facilitate modernisation, and so on. It was the Labour Government in 1945 who introduced initial allowances. We supported the investment allowance when the Conservative Government introduced it in 1954. We have constantly argued for greater industrial investment.
After the events of the last two years, particularly the last eighteen months, one is bound to carry the controversy a little further and ask for some explanation why in the last year we have had quite a lot of investment but almost no increase in production and at the end of the year we are told that our resources are overstrained.
2.30 a.m.
If we are to sacrifice revenue, as would happen under the Clause, to get investment, we want to achieve a purpose by the investment. The Economic Secretary will agree that one invests not merely for the fun of it—it is fairly expensive—but to get more productive capacity, to have capacity to produce

more in the economy or, at least, to produce the same quantity at a lower cost.
The remarkable fact—and we should have some light on it before we can decide the issue—is that we have had a great deal of investment in the last year, that the industrial production index is only one point higher—the figure has been issued today—than fifteen months ago, and yet we have heard that the economy is fully employed and overstrained, and we were told by the Economic Secretary twelve hours ago that demand is pressing hard upon resources.
That is an extraordinary economic puzzle. If it is true that after considerable investment, not merely this year, but in the preceding two years, we have had virtually no increase in production and that the economy is fully employed and over-strained, there must be something seriously wrong with the economy after ten years of Tory Government. In his remarks eleven or twelve hours ago, the Economic Secretary did not fully appreciate this and certainly did not answer the point. I hope that before we decide to allocate more revenue for stimulating industrial investment, we shall be told a little more fully what is happening.
Since our debate on the initial allowance as applied to passenger cars a week ago, I have had an interesting letter from the Financial Secretary purporting to explain that the grant of an initial allowance for cars does not concede any revenue, in effect, from the Exchequer to the taxpayer. If that were so, the increase in the capital allowances now proposed would not involve any loss of revenue to the Treasury either. I feel, however, that the Economic Secretary will tell us that it would cost so many million. If he does, will he explain why that is true in this case whereas the withdrawal of the same allowances from passenger cars would not involve any loss of revenue to the Treasury?

Dame Irene Ward: It is always at a late hour of the night or an early hour of the morning that I seem to have the privilege of moving a new Clause relating to investment allowance for dry docks. I wish that sometimes fate would be kind and this important matter could be discussed at a more reasonable hour.
First, however, I must read my new Clause—(Investment allowance for dry docks)—so that it will be on the record. It states:
An investment allowance made by virtue of subsection (2) of section sixteen of the Finance Act, 1954, as amended by section twenty-one of the Finance Act, 1959, in respect of expenditure incurred after the seventeenth day of April, nineteen hundred and sixty-one, on the construction, extension or modification of a dry dock in the United Kingdom shall be equal to two-fifths of the expenditure, instead of one-tenth.
I beg to move this new Clause.

The Temporary Chairman (Sir Samuel Storey): Order. The hon. Lady must not move it. She must discuss it with the other new Clause on which the Question is now before the Committee.

Dame Irene Ward: That is the procedure, Sir Samuel, that I am about to follow.
I hope that my hon. Friend the Economic Secretary will not take it rather hard from me that I am not so pleased to see that he will be replying to my new Clause. Those of my hon. Friends who are associated with me have been battling for this important proposal for many years. I used to think that it would take about ten years to win a battle, but I now think that it will take about twenty years.
I was somewhat disappointed to find that it is the Economic Secretary who is to reply because in the past the Chancellor has always replied. Indeed, on the last occasion, which I think was a couple of years ago, when I had the opportunity of moving a Clause very similar to this, the Chancellor was present and we had a 
wonderful interchange on the need for doing something to help owners of dry docks. I do not know, therefore, whether it is advantageous to have the Economic Secretary replying instead of the Chancellor, but perhaps on some occasion the 
Chancellor will give the Economic Secretary an opportunity to be agreeable to 
the Committee and accept one of the proposals that are made.
I do not propose to outline the whole of the detail in connection with this Clause because it has been said so often that one has got to try to find some additional reasons for suggesting that the proposal should be accepted. I am looking

to the day when we have a Treasury Minister who has really got something to do with the sea and all that pertains to it. That would be a better background against which to set this important proposal.
When matters of this kind, which are very important to our shipbuilding, ship-repairing and shipping industries, are under discussion it might be easier to deploy one's case if one could discuss it with the Minister who is responsible. It is unfortunate that the responsible Minister for dealing with dry docks, the Minister of Transport, has always said to those of us who are interested in ship-repairing, dry docks, shipbuilding and so on that if only we would tell him what we want we should be likely to get it. He has always announced that it is really the fault of people—in this case the dry-dock owners—that they have never stated conclusively what they want, and that it is therefore impossible for him to help.
I have tried for some considerable time to persuade my right hon. Friend the Minister of Transport to tell me whether he had made a recommendation to the Chancellor of the Exchequer in favour of the Clause which I am discussing, in relation to the debate on another new Clause which is being initiated by the Liberal Party. Then we come up against the next snag, when the Minister of Transport says that it would be unconstitutional for him to tell me whether he had so recommended to the Chancellor.
Therefore, when the dry-dock owners state, through those Members of Parliament who are interested in dry docks, what they want in this Bill, I have not got the slightest idea whether or not we have got the support of the Minister of Transport. But I am assuming that we have his support, because he appointed what has become a Ministry of Transport advisory committee, which originally was an Admiralty advisory committee. The present chairman is Sir Lawrence Edwards who, I am glad to say, has just been honoured by Her Majesty for, I assume, his public work. Therefore, I also assume that his views would commend themselves to the Economic Secretary. He has done a considerable amount of work for dry docks and for


all the other big interests in the ship-repairing, shipbuilding and shipping world.
Sir Lawrence Edwards, who is Chairman of the Ministry of Transport Dry Docks Committee, has supported wholeheartedly the arguments of the ship repairers. He considers that this industry is an intensely competitive industry. Ship-repairers in the United Kingdom are finding that their hands are tied compared with their Continental competitors. That is a statement by an official body of the Ministry of Transport in support of the principle embodied in the new Clause which we are now discussing. Therefore, I find it very difficult to believe that the Economic Secretary cannot support and accept the Clause which has the support of a Committee appointed by my right hon. Friend the Minister of Transport. My right hon. Friend is, of course, a senior Minister to the Economic Secretary who is to reply to this debate. I hope that I shall get a really clear answer when my hon. Friend replies, because it seems to me that this Government, which I try very hard to support, come out in favour of the well-known principle of divide and govern.
I do not quite know on which side the Economic Secretary is going to be tonight. It would be most extraordinary if he did not support the Treasury advisory committee set up by his right hon. Friend specially to advise him. Presumably, my right hon. Friend the Minister of Transport must at some stage in his career comment on what he thinks to the Economic Secretary, even if he cannot breathe it to his back bench hon. Friends. He surely must at some stage say whether he supports the views of his own committee. I think that the Minister of Transport would do that, although he does have some very peculiar ideas from time to time.
Having said that, I want to go one step further, because it seems to me that we have never really had a co-ordinated, overriding plan from any Minister of the Crown, whether it be the Chancellor of the Exchequer, the Economic Secretary, the Minister of Transport, or any other Minister, which is going to help ship-repairing, shipbuilding, shipping and the allied problems of this great industry.
Of course, one of the paints made by the ship-repairers and those interested in the construction of dry docks is that the Government have already accepted in the interests of merchant shipping that there should be a high rate of investment allowance. If the Government have accepted that for our merchant fleet, which is absolutely vital to a maritime nation such as ours and, indeed, to our survival, it is all the more extraordinary that for years and years we should have had to go on fighting in order to get it into the heads of the Treasury that ship-repairing and dry docks are a vital part of the whole of our shipbuilding, ship-repairing and shipping industry. They do not seem to be able to think very comprehensively. They think only about the merchant fleet, and they think that, if they do something for the merchant fleet, that is all that is necessary to give us a vigorous and a live and an up-to-date and progressive industry. I find that that is very disappointing.
2.45 a.m.
Having got as far as persuading the Government to give this unusual and high rate of investment allowance for the merchant shipping fleet, it seems to me to be a most extraordinary thing that in the ordinary course of events there is no flow of high rate of investment allowance for dry docks, without which, of course, we cannot have an up-to-date and well looked after fleet. It seems to me most peculiar.
The next thing I find very odd about it all is this, and it is also very disappointing when one has talks, as one does, of course, from time to time with the Chancellor of the Exchequer. Some of my hon. Friends and I went to see the Chancellor of the Exchequer about the whole principle embodied in my new Clause. I do not think the Economic Secretary was there, and I have not got that much confidence in the Treasury to be perfectly certain that the notes which were taken and the Government's views which were expressed and are now embodied in this new Clause have ever been handed on to the Economic Secretary. I do not think that co-ordination is exactly a strong point of either this Government or the Treasury. When we


were seeing the Chancellor of the Exchequer he, looking for a lifeline, suddenly started talking about the Local Employment Act and the fact that dry docks can be helped by the Local Employment Act. He seemed to think that that was absolutely the last word.
The point is that we cannot just build dry docks where, under the Local Employment Act, it may be desired to build them. We have to have dry docks on a river; we have got to have dry docks in suitable places all over this island. The Local Employment Act does not really meet the case at all. Of course, those who represent the industry do not feel that that idea of the Chancellor is one which really commends itself in toto. Though one or two dry docks are bound to be provided under the Local Employment Act, it does not help one side of the Tyne, because, of course, the Local Employment Act divides the river. It is like the Government.

Sir E. Boyle: Would the hon. Lady repeat just that last sentence?

Dame Irene Ward: What I was saying was that if some of the dry docks were on the south bank of the Tyne they could get help under the Local Employment Act, but some on the north bank cannot be helped, and so all I am saying is that that Act divides the river. I think that my hon. Friend was rather late in coming in, when I said that I thought that the principle of this Government was to divide and govern. I am sorry that the hon. Gentleman cannot entirely follow my reasoning.

Mr. Jay: Is the hon. Lady aware that the Local Employment Act does provide that it can help a project in one place if that draws employment from somewhere else to which the Act applies, and, as she knows much better than I, there is a ferry between North Shields and South Shields?

Dame Irene Ward: I am delighted to have that guidance. I think I have made more speeches pointing that out to my Government than the right hon. Gentleman. I know that very well indeed. I do not know whether the right hon. Gentleman thinks he is making a very great point or whether he is trying to be kind to me.
I know that sometimes I make my case extremely badly, but on this occasion I am entitled to say that I know about the Local Employment Act because I have been trying to persuade Governments to help Tyneside almost before the right hon. Member for Battersea, North (Mr. Jay) was born. He probably thinks that the position of the Local Employment Act in relation to dry docks is just as peculiar as I think it is and therefore I am delighted to have his support. To reinforce his idea he mentioned the ferry, but perhaps he is not quite as up-to-date as he ought to be. In a few years' time there will be a tunnel there.
The Government have never got down to finding the best way to help our ship-repairers and the shipbuilding and shipping industries. That is our complaint. They have never got down to bringing out a co-ordinated plan. I have had to make my comments about the Local Employment Act to emphasise the point that I am trying to make, but it seems extraordinary. When we went to see the Chancellor everybody was delighted that he found the time to receive representatives of the ship-repairing industry and to discuss this important matter. I do not think that any Chancellor had received such a deputation before, or at least not for a long time. Deputations had been received by junior Ministers, but much as I like junior Ministers, I like also Ministers who are in the Cabinet and who can formulate policy. It is the policy that is wrong in this case.
It is most disconcerting that we cannot persuade the Government somehow or other that if we are to have an up-to-date fleet we must have the ship-repairing facilities for it. Our international competitors give their dry-dock owners far greater assistance by way of allowances and other help than we give ours. Questions are always being raised about the reasons why so much of our shipbuilding goes abroad. If we do not have the appropriate dry docks, ships will also be sent abroad to be repaired.
I want to emphasise the point which has been made before that this is a very difficult type of investment, because when a dry dock is built or a dock is modernised it is a very long time before there is a satisfactory return on capital, and sometimes dry docks have


to be built on the basis of a very long-term view of the type of ships that will be constructed.
We know the case so well, but the real snag is that we cannot persuade the Government that dry docks are an integral part of this great industry. I do not think that I shall be popular if I go on much longer about this subject. I always listen with great interest to what Liberal Members have to say. I did not hear the beginning of the case made by the Liberal Party, because I had not imagined that I should have to speak at this hour of the morning on this important matter and I had to go out of the Chamber to collect my papers. I did not hear the opening remarks, but I did not think that the case put forward by the Liberal Party was a very powerful one.
The whole problem of investment is a most tremendous one. It is a great pity that the Chancellor could not be here. It would have been very helpful and encouraging if he had been able to be here to listen to this case. As I always like a row of Ministers, I should also have liked the Minister of Transport to be here; he does not seem to be very interested in this section of his Department if he cannot be here to listen to what is said.

Hon. Members: And the Secretary of State for Scotland.

Dame Irene Ward: I am not going to take on Scotland. All I will say is that Greenock has the benefit of the Local Employment Act. So if the Secretary of State were here he would say that he had to support the Act.
If we are discussing the spending of Government money, I have no doubt that the Economic Secretary will say that that is one of the reasons why he will not accept my Clause. I sometimes think that Government money could be spent in a better way. We might have modernised some existing dry docks. I am always extremely suspicious of Scotland. The Scots manage to get a very great deal because they have a Secretary of State for themselves. I do not like having a Minister who has so much to do that he cannot give his whole attention to one asset.
I hope that we may have a satisfactory answer from the Economic

Secretary about the Clause which I am discussing but cannot move. If I really wanted to discuss the constitutional problem in this matter, what chance is there, if I cannot move it, of the Economic Secretary accepting the Clause? I certainly hope that for the future this great industry will receive more consideration from the Treasury than it has had in the past.

Mr. Barber: The new Clause moved by the hon. Member for Huddersfield, West (Mr. Wade) and that referred to by my hon. Friend the Member for Tynemouth (Dame Irene Ward) are concerned with capital allowances, but they raise very different considerations. I hope that my hon. Friend will not be offended if I delay dealing with her Clause till later on.

Dame Irene Ward: No, as long as my hon. Friend does deal with it.

Mr. Bather: The purpose of the new Clause which has been moved is to accelerate the writing off for tax purposes of capital expenditure on plant and machinery in two ways. The two ways were clearly explained by the hon. Gentleman, and I need not go over them again.
The hon. Gentleman said that he hoped that I would not criticise the wording of the Clause. I certainly have no intention of relying, in considering the Clause, on mere technical defects of drafting, but there are certain defects of substance which are so important that I must refer to them and which I cannot believe truly represent the intention of the hon. Gentleman and his colleagues.
For reasons connected with the statutory basis of computation of initial allowances where investment allowances are also given, the Clause as drafted would have the strange effect of giving less favourable allowances for the first year to new machinery and plant qualifying for the investment allowance than for second-hand machinery and ordinary motor cars which do not rank for the investment allowance.
3.0 a.m.
I could illustrate this by graphic examples but will only say that I assume the hon. Member and his colleagues in the Liberal Party would wish to give an initial allowance of 30 per cent. to plant


ranking for investment allowance to bring the combined investment and initial allowance for new plant up to the 50 per cent. rate for initial allowances, which is the rate they propose for second-hand plant.
The effect of this Clause would be to permit the writing off for tax purposes in the first year, according to the life of the plant, of from nearly one-half of two-thirds of the cost of new plant, excluding motor cars; up to 85 per cent. of the cost of second-hand plant and 80 per cent. of the cost of new and second-hand motor cars. I would suggest to the Committee that this goes much too far. Furthermore, the cost is prohibitive. As the Clause is drafted, it would cost £80 million in this year and £110 million in 1962–63. If new plant were to be given an initial allowance of 30 per cent. as well as investment allowance of 20 per cent., as is no doubt intended, the first year cost would rise to £120 million and the second year cost to £170 million.

Mr. Jay: Do not these figures show that an increase in the initial allowance for motor cars would, in the initial years, cost the Exchequer a good deal of revenue? Does not this contradict a letter I had from the Financial Secretary to the Treasury on the cost of initial allowances?

Mr. Barber: I have not got that letter available, but it occurs to me that it may well be that for a single piece of plant the allowance for the whole life of the plant would be the same, but that does not apply in this particular case. Here, we are concerned with investment allowances and the interconnection of investment allowances, initial allowances and annual allowances. I can assure the right hon. Gentleman that the cost would be of the order I have given.
There is another aspect which the Labour Party may consider to be particularly relevant in view of their attitude to a previous Clause we considered. On other occasions when the rates of initial allowance or investment allowance have been increased, I am informed that the new rates have applied only to expenditure incurred after Budget day. In the absence of a date in this Clause, the alteration would apply to all assessments for this particular financial year. When

trading profits are assessed in 1961–62 by reference to the normal procedure or basis, the effect of the Clause would be to give a retrospective stimulus to expenditure that has already been incurred.
I have already given a clear indication of the effect of this Clause in particular instances and I do not think it necessary to go over that ground again. I ought to refer to one point specifically raised by the hon. Member for Huddersfield, West and that concerned the way in which in this country British concerns depreciate their assets for tax purposes on the basis of the original cost and not on the replacement cost. This was also a point made in the Liberal Party pamphlet of which the hon. Member for Huddersfield, West sent me a copy some weeks ago. Here again, without going into details because this is not directly raised on this Clause, I should point out that the Royal Commission did consider this problem. I would only refer the Committee to Chapter 15 of its Final Report. The Commission certainly did not take the view put by the hon. Gentleman.
This year my right hon. and learned Friend has budgeted for a very considerable surplus above the line. This has involved a net increase of £68 millions in taxation. The reasons which prompted him need not be mentioned again at this stage, because they have been discussed on many occasions since 17th April, and I do not intend, unless the Committee wishes me to do so, to go over them again. But so far as this new Clause is concerned, the shape of the Budget is highly relevant in two important respects.
First, the hon. Member for Huddersfield, West rightly referred to the importance of long-term planning in industry, and the relevance of the capital allowance to that. In a year when my right hon. and learned Friend has made provision for a net increase in taxation, it will not have escaped the hon. Member's notice that it was deliberately decided to make no change in the system of capital allowances. It is true, as he said, that the future competitive position of the United Kingdom depends very considerably on the extent to which we have productive investment.
The right hon. Member for Battersea, North (Mr. Jay) referred to the figures


of the level of production. He thought that these were somewhat odd, bearing in mind the considerable amount of investment which is going into productive industry at this time. It is sometimes forgotten that the investment in productive industry is only a prerequisite of success, and that it is just as important that those who, at all levels, operate new plant and machinery should do so efficiently and to the full. Nobody can pretend that our system of capital allowances is ungenerous. It is forecast by industry that this year investment in manufacturing industry will increase by some 30 per cent.
The second way in which the shape of the Budget is relevant to this new Clause is that, in a year when provision is made for a net increase in taxation of £68 millions, it cannot seriously be contended that the Chancellor should accept a Clause which would cost the Exchequer £80 million this year, on the face of it, or £120 million if new plant were to be treated on the same basis as second-hand plant, which is, I am sure, the intention of the hon. Member for Huddersfield, West. For these reasons, I cannot advise the Committee to accept the new Clause.
My hon. Friend the Member for Tynemouth asked me whose side I was on. I am always on her side, but it does not always follow that I can support her. She explained clearly the purpose of her new Clause, which is to increase the rate of investment allowance given on capital expenditure on the construction or enlargement of a dry dock, but for expenditure incurred after 17th April the rate will go up from 10 to 40 per cent. There will, in addition, be an initial allowance at the rate of 5 per cent.
The 40 per cent. is, as she pointed out, a special rate of investment allowance which is applicable to new ships. Under my right hon. and learned Friend's proposal, dry docks will be treated even more favourably than new ships, which do not qualify for any initial allowance. This is a particularly difficult matter which has been considered on many occasions over the last few years. As has been pointed out, my right hon. and learned Friend only a short time ago—in February, I think—discussed the matter with a deputation from the Dry Dock Owners and Repairers

Central Council, and my hon. Friend the Member for Tynemouth, my hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner) and my hon. Friend the Member for Southampton, Test (Mr. J. Howard) were present on that occasion.
The hon. Lady asked why I was not there. The reason was that as the Chancellor had decided to see her I had to deputise for him at another engagement. I can assure here that I have read a full report of what transpired. In the light of that discussion my right hon. and learned Friend considered the matter again, and came to the conclusion that there are serious difficulties and objections to the course which has been proposed. My hon. Friend may consider that some of them are surmountable, but I know that she would not wish to burk them.
The first difficulty is that, in general, discrimination in taxation matters is not desirable. In the case that we are now considering it would mean discrimination in favour not merely of one industry but of one section of one industry—in other words, the dry-dock section of the shipping and shipbuilding industry. My hon. Friend referred quite fairly to the treatment of the shipping industry, and said she thought that the treatment in respect of dry docks, in relation to capital allowances, should logically follow the treatment of the shipping industry.
It is true that at present there is discrimination in favour of the shipping industry, which enjoys the unique advantage of a 40 per cent. investment allowance for new ships, which is now sought in respect of dry docks, but the Committee will probably agree that the special treatment of new ships has always been justified by the fact that the shipping industry has to face unique difficulties. The United Kingdom shipping industry has to compete with shipping operating virtually tax-free under flags of convenience, and it would be very difficult to confine the allowance proposed by my hon. Friend for dry docks to dry docks alone among all the assets used by ship-repairers and shipbuilders.
Most industries, and most sections of industries, can point to some unique feature which distinguishes them, and


my hon. Friend the Financial Secretary can bear out the fact that a considerable number of genuine claims are made by industries or sections of industries on the ground that they are not doing well, or that their capital outlay does not give a very good return, and the return would be improved if some special tax relief were given, in the way described by my hon. Friend the Member for Tynemouth.
I appreciate the points put in support of the Clause, but it is also relevant to bear in mind that there is no evidence that the ship-repairing industry, on the whole, does not have quite a good return on its capital. I do not think that the Committee would wish me to go into detailed comparisons in relation to taxation in respect of dry docks in this country and dry docks in other countries—which was another matter referred to by my hon. Friend—but out of courtesy to her I would sum up the position by saying that while there may be differences between the dry docks of this country and those of other European countries, it cannot be said that there is such a striking contrast between the taxation position of the British dry-dock industry and that of other European maritime countries as there is between the British shipowner and the owners of the flag-of-convenience ships. Such differences as there are seem to reflect the general differences between the taxation systems rather than any special discrimination in favour of dry docks.
Indeed, if the Clause were accepted it would give the British dry-dock industry a discriminatory advantage quite unparalleled in any of the Western European countries. My right hon. and learned Friend has considered the matter most carefully in the light of what was said when my hon. Friend and her colleagues met him in February. I hope that the Committee—and my hon. Friend in particular—will appreciate that, for the various reasons I have given, my right hon. and learned Friend considers that the balance of argument is against the proposals made on behalf of the dry clocks, and that he cannot advise the Committee to accept the Clause.

3.15 a.m.

Mr. Grimond: Unlike the hon. Member for Tynemouth (Dame Irene Ward), I make no complaint about the representation

of the Government on their Front Bench. I have a high regard for the members of the Front Bench who are there at present. In any case, I see no advantage in having more Ministers behaving like ostriches and burying their heads in the sand. That was the impression I had from the answer given to this new Clause.
I do not deny that the wording of the new Clause, as my hon. Friend the Member for Huddersfield, West (Mr. Wade) said, may be wrong, but the fault in the economy cannot be denied. We are investing too little. Only a quarter of our fixed investment has been in capital for industry. There may be other suggestions for dealing with this, but simply to rush the Bill through at this moment is surely hiding from the one central matter which is facing the country today. The only good reason for finishing this Committee stage tomorrow evening at seven o'clock is that if we do not get through it quickly we shall be overtaken by the next financial crisis. It is a race between getting this Bill on the Statute Book and the Government bringing in a second financial Measure to deal with the crisis which faces the country. That crisis is essentially because we are not investing enough and have not been investing enough in the last five or ten years.

Mr. H. Wilson: The urgency to which the hon. Member refers is not in any way diminished by the news which appeared on the tape two minutes ago saying that Canada has devalued the dollar.

Mr. Grimond: That is indeed serious news. It lends all the more urgency to the necessity of the Government facing the situation of the economy and trying to accelerate growth. I think it is generally agreed that that can be done only by increasing the amount we put to industrial investment. It is a remarkable feat of the Government, as I think the right hon. Member for Battersea, North (Mr. Jay) pointed out, that what they have in fact achieved is that they are on the verge of inflation again while attaining stagnation, something no other country in the Western world has done. Some countries have a fairly low rate of expansion, but they have achieved some stability. Others have a high rate of


inflation and have achieved extra production. We, oddly enough, have achieved no extra production but are about to embark on a fresh bout of inflation.
Yet the Government say that they are not going to do anything about investment allowances and they are quite complacent about the amount the country is investing and satisfied with our showing against every other country in the world. In the face of the general situation and the news of which we have just been told, I cannot think that this is other than profoundly unsatisfactory.
Candidly, we do not intend to press this Clause to a Division, but we put on record that, like almost everyone else on this side of the Committee, we are wholly unconvinced by the attempted answer of the Government that nothing needs to be done, that the Budget is perfectly satisfactory and is meeting all the needs of the economy and that we can go to sleep for the rest of the year. No one outside the House believes that that is the case. We are faced with a situation visibly deteriorating day by day before our very eyes.

Mr. Loughlin: I had prepared some notes prior to the hon. Member for Orkney and Shetland (Mr. Grimond) speaking. They coincided to a large extent with what he said. It is fairly clear that the Government ought to get away from the complacent attitude they have adopted for so long in face of the fact that British industry is falling behind almost every industrial country in the world. I was very interested in the statement made by the Economic Secretary, but perhaps he would indicate precisely what he meant. It will be recalled that he answered some questions put to him by my right hon. Friend on the Front Bench in relation to the degree of increase which we have had in investment over the last fifteen years in particular. He said, and I took down his words very carefully, that it must be remembered that industry should operate new machinery as efficiently as before.
Is it the Government's case that the present situation in which we find ourselves is to be laid at the door of British industry? Are the Government saying that industry is responsible for the position? Is industry responsible for the

position in which we find ourselves in the matter of competition with other nations? If that is not what the Government are saying, then what do they mean? Do the Government charge British industry with having fallen down on the job? If so, then industry should know where it stands.
Quite frankly, over the past two or three years the Government have shown an immense complacency with a situation which has been constantly deteriorating. If it is true that the wording of this Clause is not all that it should be, I do not think that that justifies the Government in the attitude which they are adopting. It is pretty obvious that there has not been an economist who has written in the last eighteen months who has not urged the Government to stimulate British industry and British investment, and it is pretty obvious that some further stimulation must be offered. Unless we are very careful, we shall be in a most serious crisis in a short time and it is not sufficient for any Government, from whatever side, to be so completely complacent when dealing with the future of the people of this country.
If the Chancellor cannot accept the precise wording of the Clause now before the Committee, then he should re-examine his attitude to this problem with a view to doing something to stave off what may be the worst crisis which this country has had since this Government came into power.

Question put and negatived.

The Temporary Chairman (Sir S. Storey): The next new Clause selected is that in the name of the hon. Member for Litchfield and Tamworth (Mr. Snow)—(Sweets used for making wine vinegar).

Mr. H. Wilson: I think that I am right in saying that this will not be moved tonight. We may try to bring it forward at a later stage. Perhaps we may pass on to the next new Clause.

The Temporary Chairman: I am much obliged.

New Clause.—(BANK MAY BE OVERSEAS TRADE CORPORATION.)

Paragraph (a) of subsection (3) of section twenty-four of the Finance Act, 1957, shall be amended by the omission of sub-paragraph (i).—[Mr. Stevens.]

Brought up, and read the First time.

Mr. Geoffrey Stevens: I beg to move, That the Clause be read a Second time.
The effect of the new Clause is that a bank may be an overseas trade corporation. For many years, many of us on both sides of the Committee have realised that organisations trading in overseas territories have had the benefit of certain taxation advantages which have not been available to companies registered in this country but, none the less, are operating in these overseas territories. In the Finance Act, 1957, the then Chancellor of the Exchequer introduced an entirely new conception into our tax structure. He made provision in Section 24 for the establishment of overseas trade corporation status. That provision has been a success. It has helped British business overseas. It has been nothing like as expensive as the Treasury forecast before the measures were introduced.
The measures introduced in the Finance Act, 1957, had two defects, one of which was a minor one and the other a relatively minor one. First, overseas trade corporation status in the Finance Act, 1957, covered only overseas branches and not overseas subsidiary companies. That has been a very considerable drawback. Indeed, a number of my hon. Friends and myself have tabled a new Clause, which in the wisdom of the Chair has not been selected, the effect of which would have been to extend overseas trade corporation status to overseas subsidiary companies as well as overseas branches. I believe that a good deal of business is being lost to United Kingdom overseas companies because tax advantages accrue to foreign companies which enable them to trade at lower prices than United Kingdom companies, which have to pay the higher tax.
I am sorry that my right hon. and learned Friend has not been able in this Finance Bill to extend overseas trade corporation status to United Kingdom companies with subsidiaries overseas. Such an extension might have a noticeable beneficial effect upon our balance of payments position. That was the first and major defect of the 1957 provisions.
The second was a relatively minor one, but it was none the less important. By Section 24 (3, a, i) of the 1957 Act British banks trading overseas were

specifically prevented from having overseas trade corporation status. We have suffered a good deal from that. I raised the point in Committee in 1957 in the debate on the Question that Clause 27 stand part of the Bill. The then Financial Secretary to the Treasury, who is now the Minister of Health, answered my point. He said:
The main problem, as he"—
that is me—
recognised, is that it is extremely difficult to separate that part of the profits of a banking business which are made in this country by the central operations from those made overseas. That is at the heart of the difficulty about placing bank-businesses which qualify under Part IV".—[OFFICIAL REPORT, 27th June, 1957; Vol. 572. c. 462.]
That may well have been true then. I am by no means sure that it is true today.
British banks have discussed this matter with the Board of Inland Revenue. They have put before the Board a formula for dividing their overseas profits from their home profits. It is a formula which is reasonable and capable of being worked. It is rather too complicated to outline at length in this Committee at half-past three in the morning, but the suggestion is that banks would not pay United Kingdom Income Tax on the proportion of their total profits represented by the undistributed net profits of the overseas branches. That would put them on exactly the same basis as overseas trade corporations whose business is not banking but simply trading of different kinds.
3.30 a.m.
There are a number of reasons which should commend to my hon. Friend the Financial Secretary and to the Government the suggestion to bring the United Kingdom banks within the ambit of the overseas trade corporation provisions. First, it is fairly obvious that the United Kingdom banks operating overseas have to compete with indigenous banks which have the full benefit of any tax concessions which may apply in the area concerned. Arising out of that, the pressure of competition results in the lowering of rates chargeable for the services rendered by different banks. That means that the local banks have considerable advantages.
Again, if United Kingdom banks are to hold the position that they have held for many years, let alone extend it, they must provide services in ever-increasing areas which hitherto have had no banking facilities. That means further capital equipment of one sort or another—premises, furniture, fittings and all that kind of thing. In the case of United Kingdom banks, all that expenditure must be financed out of profits subject to tax. In a great many cases, there are tax rebates which enable banks controlled by overseas companies to provide for those additions out of their gross income. Finally, the tax burden which the banks operating overseas are called upon to bear seriously restricts the ability of the banks to meet the increased strain on capital resources out of trading profits.
The new Clause does not ask for any special privileges for banks. All that it seeks to do is to put banks on exactly the same footing as trading companies, as provided by the 1957 Act, to enable the United Kingdom banks to have overseas trade corporation status, as United Kingdom trading companies can have, to put United Kingdom banks trading overseas on the same footing as the foreign banks with which they have to compete.
In the newspapers in the last weeks, in particularly in the last days, considerable anxiety has been expressed about the fact that invisible exports are no longer contributing to the country's economy, as they have done in the past. There is much anxiety about that. It is also the fact that banking services are an exceedingly important part of our invisible exports. Anything which the Government can do to help the invisible exports of our banks, they should be willing to do. Banking services of themselves are an important part, but a great deal of other kinds of business, including invisible exports, insurance, trading in goods and all kinds of things, flows from friendly conversations with the bank managers. Acceptance of the new Clause would certainly stimulate the overseas activities of the British banks. It would do something to stem the adverse trend of our invisible exports, and I very much hope that my right hon. and learned Friend the Chancellor may find himself able to accept it.

Mr. Mitchison: Before the Financial Secretary to the Treasury replies, I want to ask one or two questions. When the matter came up in 1957, the cost of overseas trade corporations as a whole was reckoned to be £25 million in the first year and £35 million in the first full year. It was expected that in the long run, this loss to the Exchequer would be recouped by an increasing flow of dividends from overseas trade corporations. It was because the future of O.T.C.s, and particularly their financial future, was rather obscure that for the moment, at any rate, the question of including banks was postponed. That appears in the reply of the present Minister of Health in Committee to the hon. Member for Portsmouth, Langstone (Mr. Stevens).
I should like to know what, in fact, has happened. So far as I can see, the opposite has happened and instead of an increasing flow of dividends, if I have the figures right, there has been a decreasing flow. How far that is due to the changes in taxation made by the introduction of O.T.C.s I do not know, but there has been considerable speculation as to whether the result may not shave been the opposite of what was no doubt intended, and as to whether the existence of O.T.C.s has not resulted in the retention and perhaps reinvestment abroad of considerable sums of money either held there by independent O.T.C.s, if I may use the term—that is to say, the first category in the 1957 Act—or again held by subsidiaries of British companies and transferred from one subsidiary to another.

Mr. Stevens: I do not at all dissent from what the hon. and learned Gentleman has said so far, but he did quote the original estimate of the cost of the O.T.C. provisions of the 1957 Act. He mentioned £35 million. In fact, I think the estimate originally given was higher than that; I think it was £40 million. Can the hon. and learned Gentleman give the Committee the figure of the actual cost as subsequent experience has shown?

Mr. Mitchison: No, that is the figure that I am trying to ascertain. The two figures that I gave were taken from the debates of the time, and I have checked them within the last few minutes. I can find the reference if the hon. Gentleman


wants me to, but I am sure he will accept it from me that those are the ones in HANSARD.
I may have got the matter wrong, but what apparently has happened is this. If one looks at Table 32 at the end of the Economic Survey, headed "United Kingdom balance of payments," and turns to the item "Interest, profits and dividends," one would expect to see an increasing credit surplus. But that is not the position. If one takes, for instance, the year 1958, the excess of credits over debits at that time was about £250 million. The last available figures seem to show a rather smaller figure, about £200 million.
I do not know what the explanation of this may be. It may have no connection whatever with overseas trade corporations, but if the Government of the time were able to give an estimate of the cost to the Exchequer, and if, moreover, the Government recognised, as they did, that this was merely a trial experiment and would have to be watched to see what changes should be made, including, for instance, the kind of change that the hon. Gentleman has been indicating today, I hope that whoever replies for the Government will be in a position to tell us what has, in fact, happened by way of development and whether the anticipations of the time have been fulfilled.
I repeat, the reason for my asking this question is that there has been a good deal of suggestion in the Press—it may be accurate, it may not; I do not know—that the actual effect has been the very opposite of what was intended and that too much money has been kept in these O.T.C.s as a result of the tax advantages which were given to them by the 1957 Act to the detriment of our balance of payments.
As regards the banks themselves, the reason given at the time lay, I think, in the nature of the O.T.C. itself. It was essential for the purpose of the O.T.C. as defined in the Finance Act, 1957, to be able to separate the central control and direction from the day-to-day operation of the enterprise. For that reason, in Section 24 of the Finance Act there was a disqualification if the activities of the company in the United Kingdom amounted, in fact, to a trade carried on in this country. That, of

course, if the central direction was in this country and if it was also inseperable from the day-to-day management of the bank, would obviously disqualify many banks on that account alone. But, in addition to that and for similar reasons, I understand that there is the express disqualification of banks to which this Clause refers and which it is sought to omit.
I hope, therefore, that in answering the question—whatever the answer may be as regards the banks, and speaking for myself I do not see any particular reason for a change in the matter—the Financial Secretary will tell us what has happened about the financial effect, the effect on the balance of payments, of the change that was made in 1957.

Sir E. Boyle: The hon. and learned Member for Kettering (Mr. Mitchison) has asked, quite reasonably, one or two wider questions about the O.T.C. scheme and the working of it on this Clause. I will only say two things. The first is that the original estimate of the cost of the O.T.C. scheme was quoted as £35 million in a full year. I cannot give the hon. and learned Gentleman the exact figure, but I can tell him that the cost has proved to be somewhat less than the £35 million.
Without notice, I would rather not generalise this evening about the effect of the O.T.C. scheme on our balance of payments. It is difficult to speak precisely about this, but I will go with the hon. and learned Gentleman to this extent, that when we are looking at the United Kingdom balance of payments it is extremely important that we should consider the invisible account as well as the visible account. My right hon. and learned Friend would not quarrel at all with the view that we want to look very carefully at the figures of the repatriation of profits and interest.
I would rather not comment tonight on the effect of the O.T.C. scheme because, quite frankly, I should, without notice, be uneasy in my generalising about it. The hon. and learned Gentleman has certainly drawn attention to an extremely important aspect of our balance of payments, to which I know that my right hon. and learned Friend would say that we should pay close attention. Looking at the—

Mr. Mitchison: I am very much obliged to the hon. Gentleman. If a Question is put down about this perhaps the Government would be in a position to give a rather more definite answer. I am not uninterested, of course, but I am not particularly interested in the fact that the net result at the time was rather less than anticipated. I should like to know how large a part that played in the change I indicated and which appears in Table 22.

Sir E. Boyle: I am sure that if the hon. and learned Gentleman puts down a Question on the subject my right hon. and learned Friend will do his best to give an answer.
On the Clause before us I would only make two comments. The first is that my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) would, I think, agree that the Clause as we have it tonight might by itself prove to have little or no practical effect, because even if banks were not specifically disqualified it is unlikely that it would be possible for them to satisfy the statutory tests laid down for O.T.C.s. A bank with its head office in London would deal with current balances by investing them in London as a normal incident of banking business. This would make it impossible for such a bank to satisfy the requirements of the O.T.C. legislation.
I do not want to take refuge tonight simply on a technical point. I know that representations have been made that British banks carrying on business abroad should be given some relief of tax on overseas profits by analogy with the relief given by the O.T.C. scheme. I can tell my hon. Friend the Member for Langstone that this suggestion has been carefully considered by my right hon. and learned Friend. None the less. I think that there are three arguments the other way which the Committee should consider and which, I must tell my hon. Friend, my right hon. and learned Friend the Chancellor has considered decisive.
3.45 a.m.
In the first place I do not think that there is any getting away from the fact that inclusion of banks would be contrary to the whole idea of the O.T.C. scheme as conceived by the Royal Commission and as carried into effect in the 1957

legislation, namely, that the relief should be confined to those concerns whose trading operations are carried on wholly overseas, and, secondly, that banks are, of course, by no means the only concerns engaged in overseas business which find themselves excluded from the O.T.C. scheme.
The ordinary mixed trading concern which carried on trading activities in this country and overseas might for quite a variety of reasons find it inconvenient or impossible to hive off its overseas activities so as to benefit from the O.T.C. scheme. Alterations in the law to allow such mixed cases as banks to benefit from the scheme which do not allow similar arrangements to ordinary mixed trading concerns would, I think, inevitably provoke a certain amount of criticism.
Thirdly, we should not forget that determination of the amount of relief to be given to banks is a difficult matter involving a good many arbitrary assumptions, and it would be necessary in every case to agree with the bank a split of its total profits to determine the proportion which was to be regarded as overseas activities and, therefore, entitled to relief.
Therefore, just to make an amendment of the O.T.C. scheme to bring in a small increase of provision for banks would be a difficult and, I believe, unsatisfactory operation. Obviously, it is four years since the 1957 Bill and the introduction of the scheme, and in the light of a look at the whole of the O.T.C. scheme my right hon. and learned Friend will consider the position of banks and some of the wider questions which my hon. Friend raised in his speech, but I must also say, to come back to what I said at the beginning, that I think that we have to look at the whole of this O.T.C. scheme in the context of our balance of payments position as a whole and of the importance of the invisible account.
I really cannot, in present conditions, give my hon. Friend very much encouragement to think that it would be easy at this time to widen the scheme. I hope that, with those words of frank end fairly brief explanation, my hon. Friend will feel, at any rate, that he has aired what is certainly an important question and that, perhaps, he may see his way not to press the new Clause.

Mr. Stevens: My hon. Friend the Financial Secretary, in 1957, finished his reply to me by saying that this was the first stage and that we should have to see what experience teaches us as we go in its application. My hon. Friend has just admitted that we have had four years' experience of the O.T.C. status, and I should have thought that four years might have taught us quite a lot. One thing that I should have thought we had learned, not in four years but in a hundred years, is that we are the financial centre of the sterling area, if not of the world, and that the banking institutions of this contry, in particular of London, can play a very large part indeed in the resuscitation of British industry and British exports and of the invisible trade, as I said a moment ago.
My hon. Friend held out a crumb of hope that my right hon. and learned Friend will consider the position of the banks in the whole context of O.T.C. status. I can only hope that when my right hon. and learned Friend gives his consideration to it he will place more emphasis on the importance of British banks trading overseas than did my hon. Friend a moment ago. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(EXCISE DUTY ON STRENGTHENED CIDER AND PERRY.)

(1) Any intoxicating liquor which, if of lower strength, would be cider within the meaning of the Excise Acts (which includes perry) shall, if of twenty-seven degrees of proof or greater strength, be deemed for the purposes of those Acts to be sweets and not cider, unless it has undergone no other process than a single process of fermentation, was made from apple or pear juice which at the beginning of that process was in its natural state, and contains no ethyl alcohol derived from other materials.

(2) This section shall have effect as from the first day of September, nineteen hundred and sixty-one.

(3) The application of this section to Northern Ireland shall not be restricted by the provisions of subsection (5) of section thirty-three of this Act.

(4) Section two of the Finance Act, 1956, shall cease to have effect.—[Mr. Godman Irvine.]

Brought up, and read the First time.

Mr. Bryant Godman Irvine: I beg to move, That the Clause be read a Second time.
At a few minutes before four o'clock in the morning it is a great comfort to me to know that the Economic Secretary has paid such attention to the problems which we are asking the Committee to consider today.
We are asking the Economic Secretary to have another look at Section 2 of the Finance Act, 1956. I would remind him of two passages in the statements made about that Section when the Budget proposals were presented to the Committee on 17th April of that year. My right hon. Friend the Prime Minister, who was then Chancellor of the Exchequer, said that the purpose of the new proposal was
…to protect the Revenue and to remove an unfair competitive advantage.
He described the various products which would be covered by the then proposed Clause and said that cider and perry would be excluded from duty
…provided that it is established that they have been made wholly by simple fermentation of natural apple or pear juice. This distinguishes those traditional beverages from more sophisticated products made—I am told—from a wide variety of fruit and vegetables."—[OFFICIAL REPORT, 17th April, 1956; Vol. 551, c. 885.]
The present Minister of Housing and Local Government, then Financial Secretary to the Treasury, on 19th April of that year brought into the Chamber a sample product and said he wondered whether the Chairman of the Committee had often indulged in that product. He went on to say:
I brought it…to convince the Committee that there are these articles which at present have an uncovenanted advantage…the revenue would suffer if we were to take no action to make sure that they are treated for duty purposes on the same basis as other British wines."—[OFFICIAL REPORT, 19th April, 1956; Vol. 551, c. 1186.]
I should like, first, to draw the attention of the Chancellor to the fact that the sample brought into the Chamber on that occasion was of a product which has never been touched by the Section and according to my researches there was no prospect of its being covered because at that time it was not of a strength of 15 degrees of proof spirit or above. Whoever was advising the Chancellor at that time was not advising him correctly.
Then the Financial Secretary referred to "other British wines". British wines


are made from materials imported into this country and the only thing British about them is the labour put into them here. In my constituency, on the other hand, there is a company which is producing a beverage entirely from British apples. The effect of this Section on my constituents has been that whereas in 1956, 2,700 tons of apples were used, in 1957 only 620 tons were used and by 1958 no apples were used. It may be that even 2,700 tons of apples are not regarded as a very important part of the total production of the country. But I assure my hon. Friend that 2,700 tons of apples being sold in a particular area of south-east England are regarded by the local growers as of considerable importance.
This company is exporting products made entirely from British apples to Canada, Ceylon, Rhodesia, Kenya and elsewhere. But nevertheless the Chancellor in 1956 decided that he must only encouraged British wines which are produced from imported materials. As a result, my constituents' company now finds itself in a very difficult financial position and brought practically to a stage where it will have to close down.
My first point therefore is that the Section was directed at the wrong target and the article which was brought into the Chamber was never touched by the Section but hit this company, which was not in the Chancellor's mind at that time. My second point is that it was estimated at that time that a total of £400,000 would be produced in duty. We have asked on several occasions questions designed to persuade the Chancellor to tell us how much he was receiving as a result of that new Section. We have received no satisfaction from the Answers which have been given.
It may be no surprise to hon. Members to learn that we knew the Answer before we asked the Questions—and that is probably the best reason for asking a Parliamentary Question. We asked the Questions to see whether the Chancellor would be frank enough with us to admit that the estimates on which the £400,000 was based were grossly inaccurate. The figures are well enough known today for the Chancellor to be able to admit that that is the case.
There are only two companies which are paying the duty. The larger of them

is in my constituency. If the Chancellor does not know the figures, my hon. Friend the Member for Ashford (Mr. Deedes) and I will give him a fairly accurate indication that he is receiving very little as a result of the duty.
The then Chancellor said what he wanted to do was to protect the Revenue. He was hitting my small company which had, over six years, built up its position from nothing to making a profit of £116,000. In the year following the 1956 Budget, that was reduced to £3,690, and it staggered along at that level until making a small loss this year. If the Chancellor is interested in protecting the Revenue, I should have thought that it would have been desirable to encourage a company which was gradually expanding and had reached the stage where it was making a profit of £116,000 in one year rather than cut off that source of revenue and see the company making a small loss.
The Financial Secretary made the point that he wanted to see that an unfair competitive advantage was removed. I have looked at the latest balance sheet available to me for a company which produces British wine which is closely associated with the product of which a sample was brought into this Chamber. From 1952 to 1958 the company paid a dividend of 10 per cent. and in 1959 it paid 12½ per cent. and put away £90,000 for reinvestment. Yet the Chancellor has decided that he must see that an unfair competitive advantage against that company is removed.
If all these facts are examined, it will be found that the Government have been wrong from the beginning. They were wrong in their target, the estimate that they were given was wrong, and the result has not been the one which was surely in the mind of the Chancellor of the time, because it has been a disastrous blow to the small company in my constituency and to another small firm in the constituency of my hon. Friend the Member for Ashford.
For those reasons, I hope that it will be possible for the matter to be looked at again so that these companies will be given the opportunity of making a contribution to British production.

Mr. W. F. Deedes: This is a chilly subject to take just before dawn. I want to stress only one point in the case advanced by my hon. Friend the Member for Rye (Mr. Godman Irvine). I would emphasise to the Committee not the size of the injustice which we are trying to remedy, but the minuteness of it. There is no very large vested interest mixed up in this As my hon. Friend said, there are two companies—three at the outside—which were, in our belief, caught by accident by the proposal put forward by the Chancellor five or six years ago.
4.0 a.m.
Attempts have been made to show that the effect of this has been very adverse on British apples and the British fruit crop. My view is that these attempts are misconceived. The strength of our case is that a small handful of men have been most adversely hit to the point of bringing their businesses almost to ruin and that that was not the intention of the Chancellor in 1956 or the intention of Parliament in accepting what the Chancellor then proposed.
It is quite true that it did seem then, and may well seem to the Chancellor now, that there was some danger in the rapid growth of production of special types of cider and perry against comparable dutiable British wines. It was to remove that unfair competition that the Chancellor acted. He acted against alcoholic drink of 15 degree proof and above.
Excluded from this was cider and perry of any strength made wholly by simple fermentation of the natural apple or pear juice. The object was to catch fortified cider. The consequences have been quite different to what the Chancellor then conceived. The duty has not fallen on the fluids he had in mind, which has been selling in enormous quantities at a figure just below the figure then announced. We make no complaint about that, it is perfectly fair.
The Chancellor is likely to say that this justifies precisely what they are doing, that those who make fluid at a strength below 15 degrees have nothing to fear and those who go above it must pay the full duty. The consequence of this is to strike a handful of men whose

businesses have literally been brought to the brink of ruin.
The case here is that this is a very blunt instrument to achieve an entirely different purpose and has resulted in a manifest injustice. It is not what Parliament thought it would do and it has produced one of those manifest injustices to which, in the past, this Committee has never turned a blind eye. If the Treasury persist in this it must do so deliberately, knowing it is causing a crippling injustice to a tiny majority. That, to my way of thinking, has an element of scandal about it which brings some of us into this. We shall be persistent in trying to achieve this amendment of the law.

Sir Harry Legge-Bourke: As both my hon. Friend the Member for Rye (Mr. Godman Irvine) and my hon. Friend the Member for Ashford (Mr. Deedes) have constituency interests in the companies concerned, perhaps it might be fitting for an hon. Member who has no constituency interest to say a word.
The House of Commons is never better than when trying to rectify an injustice which, through its own action, has accidentally come about. What the hon. Member for Ashford said is really the point at issue. I am quite certain that had the Committee been fully acquainted with what the consequences would be in 1956 we should never have passed Section 2 of the 1956 Act, certainly not without considerable amendment.
Obviously, it was designed to catch a company which escaped and caught two companies it was never intended to hurt. It is hitting them very seriously. It is in near danger of putting one of them in a position where the head of it, who has served this country well in the Commonwealth in the past, will be put out of business altogether.
I cannot believe that this is what the House of Commons wanted. A grave personal injustice is being done. It was a miscalculation, obviously done in the best of faith. Although I know that there are suspicions in places that it was not done in the best of faith, I believe that it was. My right hon. Friend the Minister of Housing and Local Government, who was Financial


Secretary to the Treasury at the time, said, in 1956:
We are knocking nothing on the head…if they are good drinks…they should be able to compete with those liquors of similar alcoholic strength and bear the equivalent taxation."—[OFFICIAL REPORT, 5th June, 1956; Vol. 553, c. 986.]
There again, there was a misconception. It is important to remember that it is misleading to argue that the duty on high-grade cider or wine is bringing them into line with goods made from the imported product, because imported concentrates come into the country with sugar content, or, possibly, with sugar added, whereas the home producers, such as these companies, have to pay additional tax in the form of a surcharge on sugar.
Although the intention was to bring these products into line with British wines, we are penalising them more than British wines. There is a considerable double injustice here, and I hope that something can be done to put it right.

Mr. Barber: The effect of this new Clause would be to exempt from duty all strengthened cider and perry below 27 degrees of proof. So far as I know, there are no ciders and perry which exceed that limit. All three of my hon. Friends have referred to the purpose of the 1956 legislation. It is right that they should have done so, because one cannot really weigh up the merits of this case fairly without considering the reasons which prompted my right hon. Friend the Prime Minister, when he was Chancellor of the Exchequer, to make the change then.
I say frankly that before the Budget of 1956 the National Association of British Wine Producers approached my right hon. Friend the Prime Minister, then Chancellor, and pointed out that British wines were having to meet increasing competition from certain kinds of cider and perry. First, these were ciders and perries the strength of which was well above the normal for such products. Secondly, they were ciders and perries the strength of which was obtained by special processes of manufacture. Thirdly, the strength was comparable with British wines, and, in some cases a little higher, I believe. In general, however, the strength was about the same.
It was universally accepted that this higher alcoholic content was generally obtained by the addition and fermentation of sugar in quantities calculated not only to sweeten the product, but also to obtain a considerable increase in alcoholic content to a level much above the normal for cider. It is fair to say that it was considered at that time necessary to take action not only on grounds of equity, but also to protect the Exchequer against the loss of British wine duty.
This minimum strength was fixed in the Act of 1956. I admit at the outset that, of course, the amount of duty which is collected by the Customs and Excise under this Section of the Act is very small. Indeed, the British wine duty, of which this forms part, is collected as a whole, and it is not the practice to disclose the amounts collected from individual sources. If I were in a position to disclose the amount collected under this Section, it would give a fairly clear indication of the amount of business and profits of the two companies mainly concerned.
But, with one exception, the effect of the 1956 legislation was that the largest producers of strengthened ciders and perries decided to reduce the strength of their products to less than 15 degrees of proof and, consequently, to remove them from the scope of the duty. This was not only something which they could legitimately do; it was something quite consistent with the purpose of the duty, because at the reduced strength these products were weaker than wines and no longer serious competitors with it.
In the exceptional case of the one producer who continued to market this dutiable product, my information is that he has increased the alcohol strength of the cider, which is now stronger than some table wines. This firm and one other, which I know my hon. Friends have in mind, are now producing strengthened cider and are, naturally and reasonably, doing their best, in their advertisements, to make these appear quite clearly as competitive with British wines. I will not trouble the Committee by quoting the things they say.
In fairness to my hon. Friend the Member for Rye (Mr. Godman Irvine) and my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke), who have


already approached me privately about this matter, I ought to say something about the effect of this on the farming community. A few months ago I discussed this matter with representatives of the National Farmers' Union. It was then said that the duty reacted to the disadvantage of farmers, particularly in Kent, where the cider is made from cull apples, and to produce a palatable beverage a considerable amount of sugar has to be added to the apple juice.
I made very careful inquiries about this at the time, and I can assure the Committee that all my information leads me to believe that the strengthened product is far removed from the ordinary cider made with cider apples, perhaps sweetened with sugar. The extra strength derived from fermentation is one of the major attractions when the cider is sold. Secondly—and I say this only after considering the matter with great care—on the information I have obtained there seems to be no valid reason why those farmers who are using cull apples—in the main, Kentish farmers—should not use slightly less sugar, so that their product does not exceed 15 degrees of proof. In fact, I am informed that this is what some producers have done. Even then the cider is considerably stronger than much of the commercial cider on the market.
But the main question posed by my hon. Friends is: has there been any change since 1956? The object of the 1956 legislation was, first, to remove what was considered to be an unfair fiscal advantage and, secondly, to protect the Revenue. I can only say that these considerations are still applicable today. It is said that the 1956 legislation has failed because some producers have reduced the strength of their products and so do not have to pay the duty. This argument entirely misconceives the purpose of the change. It was intended not to raise revenue, but to protect the Revenue, and to remove an unfair fiscal discrimination.

Sir H. Legge-Bourke: Does not my hon. Friend agree that since the 1956 legislation there has been a reduction in the duty on foreign imported wines? If there is such a need to protect the British wine industry why was that action taken?

4.15 a.m.

Mr. Barber: The position of imported wines does not arise in this connection, because all that was done in 1956 was to bring the strength of cider into line with British wines. Consequently, I should have thought that my hon. Friend would agree that as a result of there being competition between strengthened cider and British wines they ought to pay the same duty, or that strengthened cider, in addition to British wines, should pay no duty at all as here provided, or a lower rate of duty. I should have thought that the natural comparison one could make for strengthened cider is that with British wines.
As a result of personal approaches which have been made to me over the year by individual hon. Members, I am pleased that, even at this late hour, this new Clause has been selected, because I believe that there has recently been considerable misundertaking about the purpose of the change made in 1956 and the way in which it is working out. I have discussed it on several occasions with my hon. Friends. The position is that artificially strengthened cider does compete with British wines. There can be no doubt about that; it is implicit in the advertisements which are put out by these two firms. It is fair on grounds of fiscal equity that they should be treated alike.
The facts which caused my right hon. Friend the Prime Minister to make the change in 1956 apply today, I think, with no less force than they did at that time. These facts have not been generally appreciated and I am grateful that the matter has been raised. I hope that, with that explanation, which, I think, shows that the present position is equitable and reasonable, my hon. Friends will not feel it necessary to press the new Clause.

Sir P. Agnew: That seems a very unsatisfactory reply from the Treasury. We have been told nothing about these British wines. It is probably supposed and believed that British wines are vastly inferior to drink to those wines which, quite rightly, on importing, have had the duty reduced since 1956. Why is it that the British wines require this special protection? There is, of course, only one reason. It is because they are not nearly so good or palatable as good healthy


cider made from home-grown apples, which is an industry that we ought to encourage.
The Minister refuses to give way after he has heard the tale which my hon. Friend the Member for Rye (Mr. Godman Irvine) has told—with accuracy and truth because I have heard it myself—that the company which is producing this cider will have to go out of business in my hon. Friend's constituency and another constituency. Before we leave this matter we ought to have an undertaking that, on Report, the Chancellor will look into this matter again and see whether something can be done before this industry is doomed by an obsolete and out-of-date Treasury law. It was very worthy at the time and I appreciate that it was the Prime Minister who brought it in.

Mr. Barber: As my hon. Friend knows, this provision has no relevance whatever to the great bulk of cider and perry which is produced, but is concerned only with artificially strengthened cider. My hon. Friend asked why British wines—I make no comment on their palatability, if that is the word—should have this special protection. The answer is simple. If two products were competing, as they were in 1956, it was thought right that the same duty should apply to both. If the circumstances were such in 1956 as to justify the Clause which was then introduced, as I think they were, in view of what has happened since I can see no reason why there should be a change.
Of course, this is the sort of matter my right hon. and learned Friend considers from year to year. At the moment, I can see no reason why there should be any change from the provision introduced in 1956. It is not a question of the amount of revenue involved. I think that it is understood and admitted by all that if this Section of the 1956 Act were now to be repealed one consequence would certainly be that firms which at present produce cider below the 15 per

cent. limit would, quite naturally, to make a better saleable product, go above the 15 per cent. and then become competitive with British wines. Consequently, I cannot hold out any hope about this. I should be less than frank if I said anything to the contrary. The conditions which prompted the introduction of this proposed Clause in 1956 still apply today.

Question put and negatived.

Mr. Selwyn Lloyd: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
While not pretending that I am satisfied with the progress which has been made—I intended to deal with one other new Clause—there has been co-operation except for one short period in the earlier hours of this morning. Both sides have co-operated to make progress with the Bill. I suggest that we adjourn until the next sitting day, and then begin with the new Clause which refers to light oils. I hope that we shall try to be fairly expeditious with the remaining Clauses of the Bill.

Mr. H. Wilson: I think that the Chancellor is quite right. We have made more progress than seemed likely two or three hours ago, when I last raised this question, and we have discussed the Clauses with care. If we had gone on to the light oil Clause, which I was prepared to have done, we might have been a little light tomorrow. If we start on that Clause tomorrow, on which a good deal needs to be said, we hope, nevertheless, that it will not take too long, because there are other important Clauses, particularly the non-ferrous metal mines Clause. Then there is one concerned with the wife of the incapacitated husband, and another one. I think that that is a reasonable half day's work, and that the Chancellor is right to stop work at this point.

Question put and agreed to.

Committee report Progress; to sit again this day.

Orders of the Day — LAND, NEWSTEAD (PLANNING PERMISSION)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Whitelaw.]

4.23 a.m.

Mr. William Warbey: I apologise for arriving somewhat breathless, and also apologise to the Parliamentary Secretary for keeping him so late; but that is the luck of the draw and the intricacies which have been made of the Finance Bill.
The subject with which I wish to deal this morning concerns a small plot of land in part of my constituency at Newstead. This plot is an open space in a privately developed housing estate. The matter was brought to my attention by some of my constituents, who were concerned about a decision made by the Minister of Housing and Local Government under Section 19 of the Town and Country Planning Act.
I think that there is no dispute about the essential facts of the case. The Parliamentary Secretary, in a letter he wrote to me on 24th April—incidentally, it is the only letter I have received from him, because I have not yet received a reply to a letter I wrote to him nearly six weeks ago—confirmed that in 1953 the local planning authority had given development permission for the erection of a number of dwelling-houses on this estate, known as the Regina Crescent Estate, and had given that permission on the basis of a layout plan which showed this piece of land as an open space.
In March of last year the owner of this piece of land made an application to the local planning authority for development permission for the erection of dwelling-houses. The local planning authority refused consent, whereupon the applicant, instead of appealing to the Minister under Section 15 of the Act, served on the local authority a purchase notice and, when the local authority declined to agree to compulsory purchase, exercised his right to refer the matter to the Minister under Section 19. Had the applicant made an appeal to the Minister under Section 15, there would probably have been a public inquiry and an opportunity for my constituents, the owners of the plots of adjoining land, to put their case before

a Ministry inspector and cross-examine witnesses. But that procedure was not followed, and under the Section 19 procedure there is no provision for a public hearing.
The Minister then proceeded to make a determination under Section 19. I want to emphasise that in so doing he had to decide two questions. The first was whether the land had become incapable of reasonably beneficial use. The second was whether, if he decided that it had become incapable of reasonably beneficial use, he should either confirm the purchase order or grant permission for development. If the Minister, in making his first decision, had decided that the land had not become incapable of reasonably beneficial use, that would have been the end of the matter and, in effect, the determination would have been that the land should remain as an open space. Therefore, this was the vital decision in the case.
In writing to me, the Parliamentary Secretary said that there was a hearing before a Ministry inspector. The persons present at the hearing, however, were informed that two alternatives were to be considered, namely, whether a purchase notice should be confirmed or whether permission to develop should be granted. It therefore follows that the Minister had already, on his own account, made a decision on the first point, that the land was not reasonably capable of beneficial use. He made this decision on his own account and then held the hearing, at which only two parties were represented, namely, the applicant and the local planning authority.
At that stage, the two sides were confronted with those alternatives. Naturally, the applicant was concerned either to secure a confirmation of the compulsory purchase order and, therefore, to get payment for the land, or, alternatively, to get permission to develop it. At that stage, the local planning authority could be concerned only with seeing that the purchase notice was not confirmed, because, naturally, the local planning authority did not want to be put to the cost of buying a piece of land at the expense of all the ratepayers which could be beneficial to only a few of them.
No one was present at the hearing who could put forward the third alternative, that the land should remain as open space. There was no one who could state that case or cross-examine witnesses upon it. This situation arises, I suggest, because the Minister, on his sole responsibility and, in effect, without taking evidence from the parties concerned, had already decided that the land was not capable of reasonably beneficial use. I suggest that that decision was wrong in equity, not properly based on the facts of the case and also probably wrong in law.
The Minister contends that the question of the land remaining as open space was not one which anybody had any reason to consider likely to happen. He has said in correspondence with me that although, in 1953, the local planning authority granted development permission on the basis of a plan which showed the land as open space, nevertheless the local planning authority did not lay that down as a condition. I should have thought that the fact that that authority's decision was based upon a layout plan which showed certain parcels of the land to be developed for the building of dwelling-houses and this piece to remain undeveloped, and that the local planning authority made its decision on that basis, created the substance of an implied condition. In a sense, it confirmed its view of the matter, because when the applicant asked for permission to develop this open last year the planning authority rejected the application.
The owners of the adjoining plots of land had very good reason to believe that the land would be retained as open space, because when they bought their plots of land they were shown the layout plan; they were shown this piece of land marked as open space, and a number of them have said—and I have their names in my files—that they were given definite verbal assurances that this land would remain as open space. In some cases they were informed that it would probably be taken over by the local authority and in other cases the owner discussed the possibility of planting trees and shrubs on it, but, certainly, they were given the impression that this land would remain in that condition more or less permanently.
On that basis they bought their land. Therefore, the existence of this land as open space was an inducement to them to purchase their land, and moreover was actually used as an inducement to them to purchase it. Therefore, their contention—and mine—is that the owner of this piece of land has already enjoyed full beneficial use of it because by showing it as open space at the time when he sold the rest of the land for building he was gaining a benefit. Certainly, it assisted him in selling the land, and probably he got a higher price for it than he otherwise would have done.
As I see it, he has already had his beneficial use, and if he is now able to sell it for building he will get a double benefit out of it, the second benefit on the basis of contradicting the first. This seems to me to be completely inequitable. Although the Parliamentary Secretary tells me that his right hon. Friend the Minister was aware of this when he made his decision, I cannot believe that he was fully aware of all the facts as to be able to give full weight to them in his decision. From whom could he get the information? He certainly did not get it from my constituents, the aggrieved parties. He could only have got it indirectly. He could hardly have got the full story, and, as I have said, he could not have got it in a form which would enable him to give full weight to that side of the picture.
But if the Minister's decision is, as I suggest, for this reason, not really based on a proper assessment of the facts, and inequitable, it is also probably illegal, because when the Minister makes his determination as to whether or not the land in question is incapable of reasonably beneficial use he is required by Section 19 of the Act to take into account only those uses of the land which are defined in the Third Schedule to the 1947 Act. That Schedule refers solely to the limited extension of existing buildings, to developments of agricultural use from existing agricultural use, workings ancillary to the working of mineral rights, and so on.
The applicant had not last any of these beneficial uses because they did not exist at the appointed day. Therefore, in my submission, the Minister really had no right legally to determine


that the land had been rendered incapable of beneficial use, because it is made perfectly clear in the Act that in making that decision he cannot take into account any use of the land other than what is contained in the Third Schedule, which does not cover development from agricultural or amenity use to building use.
If the Minister does not act in accordance with the law there is a remedy provided in the 1959 Act—an appeal to the High Court. But that appeal has to be made within six weeks of the Minister's action and it can be made, as Section 31 of the Act lays down, by any aggrieved person—I stress this—and not merely by the applicant whose application may have been rejected. These certainly are aggrieved persons whose rights have been affected by this decision. They could have appealed within six weeks had they known of the Minister's decision, but they had no opportunity of knowing that decision because it was made privately and as an arrangement solely between the Minister, the local planning authority and the applicant.
The situation arises in which these people, who have had their just expectations defeated by the Minister's decision, have no opportunity to remedy what they believe is a wrong done to them. They cannot have a public hearing, they cannot go before a tribunal and they cannot now go before a court of law. I feel that in these circumstances—there may be defects in the law which I cannot discuss this morning—the Minister ought either to revoke the decision or to suspend it until my constituents have had an opportunity to investigate their legal rights, or perhaps, alternatively, the Minister can suggest a way in which a period of extension may be granted for leave to appeal to the High Court against his decision.

4.43 a.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Sir K. Joseph): I congratulate the hon. Member for Ashfield (Mr. Warbey) on the lucidity with which he presented this complicated case, particularly at this hour of the day, and also the hon. Member for Fulham (Mr. M. Stewart) for his attendance here, watching that I do not get anything wrong.
I wish straight away to say that the only reason why the hon. Gentleman's last letter to me has not been answered punctually is, of course, that he has bombarded my right hon. Friend with Parliamentary Questions in the interests of his constituents, and, naturally, one delayed the reply to the letter until the Answers to the Parliamentary Questions had been given.
Secondly, I would say that no one speaks here without a sense of the difficulty of these cases. Where my right hon. Friend has to reconcile both public and private interests—in this case, the private interests of the owners and the legal requirements, there are bound to be difficulties. I do not pretend that the sequence of events has been without difficulty. But I must start off by stressing one thing which the hon. Gentleman did not bring out. Nothing that my right hon. Friend has done interferes in any way with any legal rights, common law rights, or contractual rights, which individual residents in the area may have. Planning permission does not override those rights, and nothing that I shall say in any way minimises any legal recourse which local people may think they have.
I will not go over the facts of the case, but I want to deal with the matters which cause the difficulty here. The hon. Gentleman has explained that my right hon. Friend had, in fact, to deal with two quite separate and successive questions. When the purchase notice is served, as it was in this case, by the owner of the site, there is the question, which has to be decided by my right hon. Friend, whether there is or is not a reasonably beneficial use in the land, a reasonably beneficial use in the interests of the owner.
Let me put it another way. My right hon. Friend has to decide whether the site is capable of a use reasonably beneficial to the owner of the site. The words, I think, are more precise than those used by the hon. Gentleman. I will explain the significance of that later. If my right hon. Friend decides that the site is incapable of a use reasonably beneficial to the owner and only if he so decides—the hon. Gentleman was quite right—he has to deal with the second question, which is whether he shall confirm the purchase notice or


whether he should grant some form of planning permission for the land.
I will address myself, first, to the original question, whether the site was capable of a use reasonably beneficial to the owner. The hon. Gentleman has, I think, wrongly said that my right hon. Friend decided straight away before even a hearing that the land was incapable of a use beneficial to the owner. But, in fact, the situation was quite different. My hon. Friend took the prima facie view that the land was capable of a use beneficial to the owner, and it was because that prima facie view was taken that the owner was forced to challenge the proposed decision and exercise her right to demand a hearing.
There was, therefore, a hearing between the two parties, that is, the owner, on the one hand, and the local authority, on the other. The Act does not require that my right hon. Friend should hold a public inquiry in connection with a purchase notice. The requirement is simply that the parties themselves should have a hearing. The issue here, in this sort of case, is primarily between the parties themselves. The question whether the land is or is not of reasonably beneficial use for the owner is a matter of mixed fact and law upon which the parties can be left to argue. The hon. Gentleman has laid stress upon what he says would be the right of local residents to demand a public inquiry if the owner had appealed against the refusal of the local authority to grant planning permission, but, of course, there is no right, even in planning appeal cases, for the local residents to demand a public inquiry.
After the hearing the inspector concluded that the site was capable of a reasonably beneficial use. My right hon. Friend had to review his recommendation. My right hon. Friend further decided that what he had to settle was not whether the site was capable of reasonably beneficial use, which was the view of the inspector, but whether the site was capable of a use reasonably beneficial to the owner of that site, a slightly different question.
My right hon. Friend decided this question in the negative after taking into account the facts as brought out by the inspector. In reaching his final decision,

it is quite true he is entitled to take into account only uses covered by the Third Schedule, to which the hon. Gentleman referred, which in this case, was such things as agricultural use or use as a sports field. The Schedule is limited, as the hon. Gentleman suggested, but in the planning permission my right hon. Friend ultimately gave he was free to give permission for a use outside the Third Schedule.
I should explain to the House why my right hon. Friend decided that this site was incapable of a use reasonably beneficial to the owner. This particular area is hemmed in and not large enough to lend itself to agriculture or use as a sports field. It was, therefore, clear to my right hon. Friend that the site was really of no reasonably beneficial use for the owner. He asked himself, for instance, whether any possible use was so beneficial that other people might have offered money for the use. Might the local residents, for instance, have thought it worth while to buy it to turn it into a tennis club or playground? My right hon. Friend came to the conclusion that the site was not big enough for that.
A great deal has been said about the previous history of the land and the question whether the owner had already derived benefit from it as a result of the purchasers of the plots surrounding it paying more than they would otherwise, on the assumption that the land would remain an open space. The important thing to remember is that the Minister's task in these cases is to decide whether the land in question has become incapable of reasonably beneficial use in its existing state. He has to consider what beneficial use the land had at the time the notice was served. Whether or not the owner has at an earlier stage derived some benefit from the land is not basic to that decision. He has to consider the land in its existing state, taking account of any existing permissions for development, and any other uses of the land which did not require permission.
An important point in the history of the case, which, perhaps, has been misinterpreted, and to which the hon. Member referred in passing, is that when planning permission was granted for development of the whole estate no condition was imposed requiring the layout of this site as an open space.


The site of the purchase notice area was excluded from the benefit of the main planning permission. It is interesting to remember that three years after the main planning permission was given for the surrounding site the owner of the purchase notice site applied for planning permission in respect of the purchase notice site and other pieces of land, and was refused. He claimed compensation and was paid compensation for the purchase notice site itself of £136. Of course, that will have to be repaid in the new circumstances.
I am explaining this to show that the purchase notice site had a different planning identity, quite separate from the land on which houses were built around the purchase notice site. This is convincingly shown by the fact that planning permission was refused for the purchase notice site in 1956 and compensation of £136 was paid. The purchasers of the plots surrounding it, therefore, were not entitled to assume that the land would be laid out as an amenity open space to serve the estate. The mere fact that this was marked as an open space in the approved layout plan or in their title deeds provided no guarantee of this.
I am not passing comment on their legal rights in connection with their title deeds. Had there been a condition of the permission which required the layout

of the land as an amenity open space, purchasers might have reasonably relied on that condition and it might have been possible to maintain that the land was capable of reasonably beneficial use as an amenity open space in accordance with that condition.
My right hon. Friend decided that this land was not capable of reasonably beneficial use to the owner. The hon. Member complains that no one at the hearing urged that the land should be left as an open space, but the hearing was not to decide the ultimate use of the land, but whether there was, at the moment of service of the purchase notice, a reasonably beneficial use for the owner in that particular site. My right hon. Friend, having made this decision, had to address himself to the second question, whether he should confirm the purchase notice of the local authority or give planning permission. It is important to explain that if, nine months after purchase notice has been served, no action is taken to exclude such an event, the purchase notice—

The Question having been proposed after Ten o'clock on Tuesday evening and the debate having continued for half an hour, MR. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at six minutes to Five o'clock a.m.